Saturday, April 21, 2012

Tax Cash

Cash is bad in so many ways. The average consumer, suppliers and retail, manufacturers and government all, are detrimentally impacted by cash economies. Reduced tax collection, the ability to launder money, relative ease to counterfeit money, cost of printing and handling of cash, direct impact in the reduction of growth are all reasons to get rid of cash. There has been many initiatives to reduce cash in many countries with relative success.

Some years back, the Republic of Korea (South Korea), implemented a scheme where retailers would pay a reduced VAT rate for payments received electronically (compared to cash). The effect of this arrangement was that Korea is one of the countries with the most advanced electronic payment infrastructure. Cash transactions, constitute a smalerl percentage of retail payments. By making electronic transactions more attractive from a tax dispensation perspective, will change behaviour towards electronic payments, reducing cash and indirectly leading to growth.

Governments should consider schemes to make cash payments unattractive from a tax perspective. This can be done in many ways, but will indirectly eliminate the bad effects of a cash economy.

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