THE EFFECT
OF CARD PAYMENTS ON VAT REVENUE IN GREECE
George Hondroyiannis
Bank of Greece and Harokopio University
Dimitrios Papaoikonomou
Bank of Greece
ABSTRACT
The effect of card payments on VAT revenue performance
in Greece is investigated using quarterly observations on card transactions during
2002q1-2016q2. Time-varying-coefficient methods are employed, in order to study
the role of increasing card payments after the imposition of cash restrictions
in July 2015. We find that (i) a 1pp
increase in the share of card payments in private consumption results in
approximately 1%
higher revenue through increased compliance; (ii) lowering
the VAT rate can generate revenue gains; (iii)
card transactions may facilitate tax buoyancy. It is argued that stronger
incentives for using card payments in tax evading industries can help lock-in
the recent strong revenue performance when cash restrictions are lifted.
JEL
classification: E62, H21,
H25, H26, K34
Keywords: VAT, card payments,
time-varying-coefficients, Greece
Acknowledgements: We would
like to thank an anonymous referee for helpful comments and suggestions on an
earlier draft and K. Kotsoni and M.Vergou for useful discussions. The views
expressed are those of the authors and should not be interpreted as those of
their respective institutions.
Correspondence:
George Hondroyiannis,
Economic Analysis and Research Department,
Bank of Greece,
21, E. Venizelos Avenue,
Athens 102 50, Greece,
Tel. +30 210 3202429
Email:ghondroyiannis@bankofgreece.gr