FISCAL STUDIES, vol. 39, no. 2, pp. 343–364 (2018) 0143-5671
Fighting Tax Evasion by Discouraging the Use
† and F
†University of Naples Federico II
‡University of Naples Federico II
We propose a bargaining model of tax evasion with a seller that offers a price
discount to a buyer in exchange for a cash payment without a receipt, which
allows tax evasion. We study the effect on evasion and government revenue
of two policy instruments: a tax on cash withdrawals (TCW), which imposes
a cost on the buyers who pay cash, and a tax rebate conditional on having the
receipt. The tax rebate reduces evasion but it is costly if tax evasion is low.
The TCW reduces evasion only if it is set at a sufﬁciently high rate, which
must be higher the larger is the mass of cash users. We also show that the
implementation of a TCW, which poses several challenges, is easier if the cost
of cash hoarding is high.
European data show that a higher frequency of cashless payments is
actually associated with lower tax evasion. This evidence suggests that
Submitted April 2017.
For useful comments, the authors would like to thank the editor, James Ziliak, two anonymous referees,
Emilio Calvano, Elena Creti, Elena D’Agosto, Vincenzo Denicol
o, Luigi Franzoni, Joe Hasell, Tullio
Jappelli, Francesco Lippi, Marco Pagano, Nicola Pavoni, Carmelo Petraglia, Emanuela Randon, Marisa
Ratto, Harald Uhlig and seminar participants at the Tenth CSEF–IGIER Symposium on Economics and
Institutions (Anacapri), the Third Shadow Economy Conference 2013 (Munster), Universit
a Federico II
e Dauphine (Paris), Universit
e Paris Ouest Nanterre La D
efense (Paris), SIDE-ISLE
2013 (Lugano), Universit
a di Bologna, Einaudi Institute for Economics and Finance (EIEF) and Societ
Italiana degli Economisti (SIE) 2015.
Keywords: cooperative tax evasion, tax on cash, rebate.
JEL classiﬁcation numbers: O17, H21.
2017 Institute for Fiscal Studies. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford,
OX4 2DQ, UK, and 350 Main Street, Malden, MA 02148, USA.