CEU Electronic Theses and Dissertations, 2025
| Author | Vida, Márton |
|---|---|
| Title | Card Payments and Value-Added Tax (VAT) Compliance |
| Summary | While cash is known to be a complement of the shadow economy, the impact of card payments on Value-Added Tax (VAT) compliance has rarely been studied. This thesis aims to fill this gap by empirically investigating whether the rise of card payments whitened VAT revenue across Europe. Firstly, using quarterly time-series data from Hungary and constructing a simple indicator of VAT compliance (C-efficiency), I show that card payments positively impacted compliance. Secondly, employing a panel of 21 European countries, as well as the EU’s VAT Compliance Gap indicator, it is found that the increase in the share of card transactions lower VAT non-compliance. I estimate that a one percentage point ceteris paribus increase in the share of card transactions in all transactions reduces VAT evaded by approximarely 0.05-0.06 percentage points on avarage. While both tests suffer from limitations, they contribute to a small but growing body of evidence in the field. Two policy implications emerge: firstly, as electronic payments spread, the VAT will become a more effective tax than it used to be; and secondly, by discouraging the use of cash, governments can decrease VAT non-compliance. |
| Supervisor | Bárány, Zsófia |
| Department | Undergraduate Studies BA |
| Full text | https://www.etd.ceu.edu/2025/vida_marton.pdf |
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