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This paper investigates the effect of electronic payments technology on firms’ tax compliance in a large developing economy. We consider India’s demonetization policy which, by limiting the availability of cash, led to a large increase in the use of electronic forms of payments. Using administrative data on firms’ tax returns and variation in the strength of the demonetization shock across local areas, we find that greater use of electronic payments leads to firms reporting more sales to the tax authorities. This effect is strong enough to explain roughly half of the large (11%) increase in reported sales observed during demonetization.
Authors
![Lucie Gadenne](/sites/default/files/styles/square_desktop/public/2022-05/Lucie_Gadenne.jpg?itok=rLKd1kUE)
Associate Director
Lucie is an Associate Director at the IFS and an Associate Professor at Queen Mary University of London.
![Ross Warwick](/sites/default/files/styles/square_desktop/public/2022-06/Ross_Warwick.jpg?itok=xAuUlF-5)
International Research Associate
Ross joined the IFS in 2016 and works in a couple of areas of IFS research.
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
Tushar Nandi
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
Satadru Das
Working Paper details
- DOI
- 10.1920/wp.ifs.2022.0322
- Publisher
- Institute for Fiscal Studies
Suggested citation
Das, S et al. (2022). Does going cashless make you tax-rich? Evidence from India’s demonetization experiment. London: Institute for Fiscal Studies. Available at: https://ifs.org.uk/publications/does-going-cashless-make-you-tax-rich-evidence-indias-demonetization-experiment (accessed: 30 June 2024).
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