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Can tax incentives for electronic payments reduce the shadow economy?

: Korea's attempt to reduce underreporting in retail businesses
  • Can tax incentives for electronic payments reduce the shadow economy?
  • Sung, Myung Jae; Awasthi, Rajul; Lee, Hyung Chul
  • [Washington DC, U.S.] : World Bank Group
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Title Can tax incentives for electronic payments reduce the shadow economy?
Subtitle Korea's attempt to reduce underreporting in retail businesses
Author Sung, Myung Jae; Awasthi, Rajul; Lee, Hyung Chul
Publisher [Washington DC, U.S.] : World Bank Group
Publication Date 2017 - 01
Material Type Report
Country South Korea Holding World Bank Group
Language English License 저작자표시-비영리-변경금지
Series Title Policy research working paper

Abstract

Increasing tax revenues by reducing the shadow economy has been a central goal of tax policy and administration in the Republic of Korea since the National Tax Service was established as an independent agency in 1966. This paper examines the Tax Incentive for Electronically Traceable Payments, which was introduced by the Korean tax authorities in 1999 to promote payments made using credit cards, debit cards, and electronic cash receipts in business-to-consumer transactions. The tax incentive allows wage and salary earners to claim tax deductions for eligible purchases made using electronically traceable payments when they file their year-end income tax settlements. The tax incentive scheme greatly contributed to changing the Korean economy into a cashless economy over the past decade and a half. Card payments as a ratio of Korea’s gross domestic product have ranked the highest in the world since 2005, reaching 49 percent in 2014. (The rest omitted)

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