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Cryptocurrency use and tax collections: Direct and indirect channels of influence

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  • Goel, Rajeev K.
  • Mazhar, Ummad

Abstract

Using a recent global sample, this paper estimates the effect of cryptocurrency usage on tax revenue collections. We hypothesize that greater cryptocurrency use undermines tax collections, and this result generally holds across overall tax collections, VAT revenues, and GST revenues. The other contribution lies in dissecting the direct and indirect channels of cryptocurrency use on tax collections. Results show that greater cryptocurrency usage reduces tax collections. Furthermore, larger government sizes increase tax collections, while the COVID-19 pandemic undermined tax collections. Finally, significant differences were found in the direct and indirect effects. The main results withstand a number of robustness checks.

Suggested Citation

  • Goel, Rajeev K. & Mazhar, Ummad, 2024. "Cryptocurrency use and tax collections: Direct and indirect channels of influence," Journal of Financial Stability, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:finsta:v:72:y:2024:i:c:s1572308924000366
    DOI: 10.1016/j.jfs.2024.101251
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    More about this item

    Keywords

    Cryptocurrency; Tax collection; Mediation analysis; Informal economy; Corruption; Government; Money laundering; Inflation; Plastic money; VAT tax; GST tax;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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