Can tax evasion be reduced by fostering cashless payments? A systematic literature review

Tax evasion is a crucial issue worldwide. It is facilitated by the cash economy, as cashis untraceable and allows individuals to easily conceal the history of their transac-tions, thus facilitating underreporting. Conversely, cashless payments are traceable,which makes evasion more difficult. Despite increasing interest from policy makers,the literature on the impact of payment instruments on tax evasion is still scarce andfragmented. This paper therefore presents a systematic literature review on the topic.More specifically, we analyze 26 papers published in peer-reviewed journals, whichdocument that cash has a positive impact on tax evasion and the shadow economywhereas card payments foster value added tax compliance. Other topics, such as theimpact of digital wallets and central bank digital currencies on tax evasion, prove toCorresponding author: G. SpinelliPrint ISSN 2049-5404jOnline ISSN 2049-5412 (c) 2024 Infopro Digital Risk (IP) Limited65 be rather neglected. Finally, we discuss which policies can be introduced by policymakers to reduce tax evasion, and we provide suggestions for future research.