IDEAS home Printed from https://ideas.repec.org/a/wly/fistud/v43y2022i4p387-403.html
   My bibliography  Save this article

Cash thresholds, cash expenditure and tax evasion

Author

Listed:
  • Francesco Flaviano Russo

Abstract

Using data for Italy, I show that cash thresholds that forbid the use of cash for big transactions are effective tools to reduce cash income and cash circulation. Less cash income, in turn, hinders tax evasion. I present an estimate of the increase in tax revenue implied by the empirically estimated reduction of cash income determined by the thresholds.

Suggested Citation

  • Francesco Flaviano Russo, 2022. "Cash thresholds, cash expenditure and tax evasion," Fiscal Studies, John Wiley & Sons, vol. 43(4), pages 387-403, December.
    • Handle: RePEc:wly:fistud:v:43:y:2022:i:4:p:387-403
    DOI: 10.1111/1475-5890.12311
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1475-5890.12311
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1475-5890.12311?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Klee, Elizabeth, 2008. "How people pay: Evidence from grocery store data," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 526-541, April.
    2. Buiter, Willem H., 2009. "Negative nominal interest rates: Three ways to overcome the zero lower bound," The North American Journal of Economics and Finance, Elsevier, vol. 20(3), pages 213-238, December.
    3. Mathias Drehmann & Charles Goodhart & Malte Krueger, 2002. "The challenges facing currency usage: will the traditional transaction medium be able to resist competition from the new technologies? [‘Statement before the subcommittee on general oversight and i," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 17(34), pages 193-228.
    4. Giammatteo, Michele & Iezzi, Stefano & Zizza, Roberta, 2022. "Pecunia olet. Cash usage and the underground economy," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 107-127.
    5. Hayashi Fumiko & Klee Elizabeth, 2003. "Technology Adoption and Consumer Payments: Evidence from Survey Data," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-16, June.
    6. Orazio P. Attanasio & Luigi Guiso & Tullio Jappelli, 2002. "The Demand for Money, Financial Innovation, and the Welfare Cost of Inflation: An Analysis with Household Data," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 317-351, April.
    7. Gene Amromin & Sujit Chakravorti, 2009. "Whither Loose Change? The Diminishing Demand for Small-Denomination Currency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(2-3), pages 315-335, March.
    8. Lippi, Francesco & Secchi, Alessandro, 2009. "Technological change and the households' demand for currency," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 222-230, March.
    9. Junmin Wan, 2010. "The Incentive to Declare Taxes and Tax Revenue: The Lottery Receipt Experiment in China," Review of Development Economics, Wiley Blackwell, vol. 14(3), pages 611-624, August.
    10. Marc Rysman, 2007. "An Empirical Analysis Of Payment Card Usage," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 1-36, March.
    11. Amedeo Piolatto, 2015. "Itemised Deductions: A Device to Reduce Tax Evasion," German Economic Review, Verein für Socialpolitik, vol. 16(4), pages 422-438, November.
    12. Immordino, Giovanni & Russo, Francesco Flaviano, 2018. "Cashless payments and tax evasion," European Journal of Political Economy, Elsevier, vol. 55(C), pages 36-43.
    13. Giovanni Immordino & Francesco Flaviano Russo, 2018. "Fighting Tax Evasion by Discouraging the Use of Cash?," Fiscal Studies, John Wiley & Sons, vol. 39(2), pages 343-364, June.
    14. repec:dgr:kubcen:201060 is not listed on IDEAS
    15. Esselink, Henk & Gijsel, Lola Hernandez-van, 2017. "The use of cash by households in the euro area," Occasional Paper Series 201, European Central Bank.
    16. Fernando Alvarez & Francesco Lippi, 2009. "Financial Innovation and the Transactions Demand for Cash," Econometrica, Econometric Society, vol. 77(2), pages 363-402, March.
    17. Kenneth Rogoff, 2015. "Costs and Benefits to Phasing out Paper Currency," NBER Macroeconomics Annual, University of Chicago Press, vol. 29(1), pages 445-456.
    18. Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532484, April.
    19. Fabbri, Marco, 2015. "Shaping tax norms through lotteries," International Review of Law and Economics, Elsevier, vol. 44(C), pages 8-15.
    20. Gabriel Chodorow-Reich & Gita Gopinath & Prachi Mishra & Abhinav Narayanan, 2020. "Cash and the Economy: Evidence from India’s Demonetization," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(1), pages 57-103.
    21. Gordon, James P F, 1990. "Evading Taxes by Selling for Cash," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 244-255, January.
    22. Sands, Peter & Weisman, Benjamin & Campbell, Haylea & Keatinge, Tom, 2017. "Limiting the Use of Cash for Big Purchases: Assessing the Case for Uniform Cash Thresholds," International Cash Conference 2017 – War on Cash: Is there a Future for Cash? 162906, Deutsche Bundesbank.
    23. Furnham, Adrian & Boo, Hua Chu, 2011. "A literature review of the anchoring effect," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(1), pages 35-42, February.
    24. William J. Baumol, 1952. "The Transactions Demand for Cash: An Inventory Theoretic Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 66(4), pages 545-556.
    25. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-954, August.
    26. Ardizzi, Guerino & De Franceschis, Pierpaolo & Giammatteo, Michele, 2018. "Cash payment anomalies and money laundering: An econometric analysis of Italian municipalities," International Review of Law and Economics, Elsevier, vol. 56(C), pages 105-121.
    27. Joana Naritomi, 2019. "Consumers as Tax Auditors," American Economic Review, American Economic Association, vol. 109(9), pages 3031-3072, September.
    28. Kenneth S. Rogoff, 2016. "The Curse of Cash," Economics Books, Princeton University Press, edition 1, number 10798.
    29. Sandmo, Agnar, 2005. "The Theory of Tax Evasion: A Retrospective View," National Tax Journal, National Tax Association;National Tax Journal, vol. 58(4), pages 643-663, December.
    30. Schneider, Friedrich, 2017. "Restricting or Abolishing Cash: An Effective Instrument for Fighting the Shadow Economy, Crime and Terrorism?," International Cash Conference 2017 – War on Cash: Is there a Future for Cash? 162914, Deutsche Bundesbank.
    31. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 25-48, Winter.
    32. Juin-jen Chang & Ching-chong Lai, 2004. "Collaborative tax evasion and social norms: why deterrence does not work," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 344-368, April.
    33. Amedeo Piolatto, 2015. "Itemised Deductions: A Device to Reduce Tax Evasion," German Economic Review, Verein für Socialpolitik, vol. 16(4), pages 422-438, November.
    34. repec:bla:rdevec:v:14:y:2010:i:s1:p:611-624 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bohne, Albrecht & Koumpias, Antonios M. & Tassi, Annalisa, 2023. "Cashless payments and tax evasion: Evidence from VAT gaps in the EU," ZEW Discussion Papers 23-060, ZEW - Leibniz Centre for European Economic Research.
    2. Rainone, Edoardo, 2023. "Tax evasion policies and the demand for cash," Journal of Macroeconomics, Elsevier, vol. 76(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Immordino, Giovanni & Russo, Francesco Flaviano, 2018. "Cashless payments and tax evasion," European Journal of Political Economy, Elsevier, vol. 55(C), pages 36-43.
    2. Francesco Flaviano Russo, 2020. "Cash Thresholds, Cash Expenditure and Tax Evasion," CSEF Working Papers 579, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    3. Rainone, Edoardo, 2023. "Tax evasion policies and the demand for cash," Journal of Macroeconomics, Elsevier, vol. 76(C).
    4. Arango-Arango, Carlos A. & Suárez-Ariza, Nicolás, 2020. "Digital payments adoption and the demand for cash: New international evidence," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 14(4), pages 392-410, December.
    5. John Bagnall & David Bounie & Kim P. Huynh & Anneke Kosse & Tobias Schmidt & Scott Schuh, 2016. "Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 1-61, December.
    6. Edoardo Rainone, 2022. "Currency demand at negative policy rates," Temi di discussione (Economic working papers) 1359, Bank of Italy, Economic Research and International Relations Area.
    7. Hans-Eggert Reimers & Friedrich Schneider & Franz Seitz, 2020. "Payment Innovations, the Shadow Economy and Cash Demand of Households in Euro Area Countries," CESifo Working Paper Series 8574, CESifo.
    8. Yulia Titova & Delia Cornea & Sébastien Lemeunier, 2021. "What Factors Keep Cash Alive in the European Union?," De Economist, Springer, vol. 169(3), pages 291-317, August.
    9. Ulf Kalckreuth & Tobias Schmidt & Helmut Stix, 2014. "Choosing and using payment instruments: evidence from German microdata," Empirical Economics, Springer, vol. 46(3), pages 1019-1055, May.
    10. Michele Manna, 2022. "The bonfire of banknotes," Temi di discussione (Economic working papers) 25, Bank of Italy, Economic Research and International Relations Area.
    11. David, Bounie & Abel, François & Patrick, Waelbroeck, 2016. "Debit card and demand for cash," Journal of Banking & Finance, Elsevier, vol. 73(C), pages 55-66.
    12. António Rua, 2019. "Modelling the Demand for Euro Banknotes," Working Papers w201905, Banco de Portugal, Economics and Research Department.
    13. Franz Seitz & Hans-Eggert Reimers & Friedrich Schneider, 2018. "Cash in Circulation and the Shadow Economy: An Empirical Investigation for Euro Area Countries and Beyond," CESifo Working Paper Series 7143, CESifo.
    14. Tamás Briglevics & Scott Schuh, 2020. "This Is What's in Your Wallet...and Here's How You Use It," Working Papers 20-04, Department of Economics, West Virginia University.
    15. Martin Brown & Nicole Hentschel & Hannes Mettler & Helmut Stix, 2020. "Financial Innovation, Payment Choice and Cash Demand - Causal Evidence from the Staggered Introduction of Contactless Debit Cards," Working Papers on Finance 2002, University of St. Gallen, School of Finance.
    16. Luca Baldo & Elisa Bonifacio & Marco Brandi & Michelina Lo Russo & Gianluca Maddaloni & Andrea Nobili & Giorgia Rocco & Gabriele Sene & Massimo Valentini, 2021. "Inside the black box: tools for understanding cash circulation," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 7, Bank of Italy, Directorate General for Markets and Payment System.
    17. Martin Brown & Nicole Hentschel & Hannes Mettler & Helmut Stix, 2020. "Financial Innovation, Payment Choice and Cash Demand – Causal Evidence from the Staggered Introduction of Contactless Debit Cards (Martin Brown,Nicole Hentschel, Hannes Mettler, Helmut Stix)," Working Papers 230, Oesterreichische Nationalbank (Austrian Central Bank).
    18. Ulf Von Kalckreuth & Tobias Schmidt & Helmut Stix, 2014. "Using Cash to Monitor Liquidity: Implications for Payments, Currency Demand, and Withdrawal Behavior," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(8), pages 1753-1786, December.
    19. Schuh, Scott & Stavins, Joanna, 2010. "Why are (some) consumers (finally) writing fewer checks? The role of payment characteristics," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1745-1758, August.
    20. Columba, Francesco, 2009. "Narrow money and transaction technology: New disaggregated evidence," Journal of Economics and Business, Elsevier, vol. 61(4), pages 312-325, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:fistud:v:43:y:2022:i:4:p:387-403. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1475-5890 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.