Publication
This paper in the American Economic Journal: Economic Policy leverages variation from Uruguay’s financial inclusion reforms to examine the effect of financial incentives on the take-up of electronic payment technologies (EPTs) among firms and consumers, and on the tax compliance behaviour of firms.
Does the digitization of transactions in an economy increase tax compliance? We study the effect of financial incentives on the adoption of electronic payment technology and on tax compliance by firms. Exploiting administrative data and policy variation from Uruguay, we show that (i) consumer VAT rebates for credit and debit transactions trigger an immediate 50 percent increase in the number of card transactions, (ii) firms' use of card machines increases only on the intensive margin, and (iii) tax compliance is unaffected. Endogenous card machine adoption and a low share of card sales in total reported sales can rationalize the findings.
American Economic Journal: Economic Policy - Volume 17, Number. 1 - February 2025 - Pages 242–72.
Published on: 25th February 2025
