ΙΔΡΥΜΑ ΟΙΚΟΝΟΜΙΚΩΝ & ΒΙΟΜΗΧΑΝΙΚΩΝ ΕΡΕΥΝΩΝ FOUNDATION FOR ECONOMIC & INDUSTRIAL RESEARCH Τσάμη Καρατάσου 11, 117 42 Αθήνα, Tηλ.: 210 92 11 200-10, Fax: 210 92 33 977, www.iobe.gr 11 Tsami Karatassou, 117 42 Athens, Greece, Tel.: +30 210-9211 200-10, Fax: +30210-9233 977 Digital payments and tax revenues in Greece October 2015 2 Digital payments and tax revenues in Greece The judgments on policy issues and the proposals contained in this study express the opinions of the researchers and do not necessarily reflect the opinion of the members or the management of IOBE. The research for this study was conducted by S. Danchev, E. Demian, E. Papadakis, N. Paratsiokas, C. Peppas, F. Thomaidou and E. Valavanioti, under the supervision of the Director General of IOBE, Professor N. Vettas. The researchers would like to thank representatives of the Hellenic Banking Association, the Ministry of Finance, the Bank of Greece, commercial banks and finance service enterprises for their participation in workshops and their contribution to the study with comments, ideas and data. All remaining errors should be attributed to the authors alone. The Foundation for Economic & Industrial Research IOBE is a private, non-profit, public-benefit research organisation. It was established in 1975 with the dual purpose of promoting research on current problems and prospects of the Greek economy and its sectors and of generating reliable information, analysis and proposals for action that can be of high value in economic policy making. ISBN 978-960-7536-63-1 Copyright 2015 Foundation for Economic & Industrial Research This study may not be reproduced in any form or for any purpose without the prior knowledge and consent of the publisher. Foundation for Economic and Industrial Research IOBE 11 Tsami Karatassou St, 117 42 Athens Tel. (+30210 9211200-10), Fax:(+30210 9233977) E-mail: [email protected] – URL: http://www.iobe.gr Foundation for Economic and Industrial Research IOBE Executive summary 3 Contents Executive summary .......................................................................................................... 8 1. Introduction .................................................................................................... 16 2. Use of electronic means of payment in Greece ................................................. 18 2.1 Electronic means of payment ................................................................................................ 18 2.2 Digital payment trends .......................................................................................................... 19 2.3 Composition of transactions per payment instrument .......................................................... 24 2.3.1 Payment cards .................................................................................................................. 26 2.3.2 Credit transfers ................................................................................................................. 33 2.3.3 Direct debits ..................................................................................................................... 36 2.3.4 E-money purchase transactions ....................................................................................... 39 2.3.5 Cheques ............................................................................................................................ 43 2.3.6 Other payment instruments ............................................................................................. 45 2.4 Demographic characteristics of the card use in Greece ......................................................... 48 2.4.1 Use of payment cards ....................................................................................................... 48 2.4.2 Reward for the use of cards .............................................................................................. 53 2.5 Impact of the bank holiday and the capital controls ............................................................. 57 2.6 Summary ................................................................................................................................ 60 3. Barriers in the diffusion of electronic payments ................................................ 61 3.1 The role of the state in the adoption of electronic payments ................................................ 61 3.2 Consumer behaviour .............................................................................................................. 63 3.2.1 Consumer perceptions ..................................................................................................... 63 3.2.2 Internet penetration ......................................................................................................... 66 3.2.3 Economic factors .............................................................................................................. 67 3.3 Business factors affecting the use of electronic payments .................................................... 68 3.3 Conclusions ............................................................................................................................ 73 4. Incentives for the use of electronic means of payment ..................................... 74 4.1 Incentives to boost the EMP use at country level .................................................................. 74 4.1.1 Discount on transaction value .......................................................................................... 74 4.1.2 Income tax discounts ........................................................................................................ 75 4.1.3 Cash ban ........................................................................................................................... 77 4.1.4 Technological developments ............................................................................................ 78 4.1.5 Alternative means of reducing tax evasion in commercial transactions .......................... 79 4.2 Incentives for EMP use provided by banks and businesses .................................................... 80 4.3 Effectiveness of the incentives for EMP use in Greece ........................................................... 81 4.3.1 Methodological approach of the empirical analysis ......................................................... 81 4.3.2 Results .............................................................................................................................. 81 4.3.3 Conclusions ....................................................................................................................... 83 4.4 Summary ................................................................................................................................ 84 4.5 Appendix ................................................................................................................................ 86 5. Electronic payments, the informal economy and economic development .......... 91 5.1 Electronic transactions and the informal economy ............................................................... 91 5.1.1 Key drivers of informal activity ......................................................................................... 92 5.1.2 Methods of measuring the informal economy ................................................................. 93 5.2 Electronic transactions and economic development ............................................................. 95 5.2.1 Social cost of payment instruments ................................................................................. 96 5.2.2 Effects of electronic payment methods on macroeconomic aggregates ......................... 96 5.2.3 Causal relations between electronic transactions and economic development .............. 97 5.3 Effect on tax revenues in Greece ........................................................................................... 99 5.3.1 Methodological approach ................................................................................................. 99 5.3.2 Results ............................................................................................................................ 100 5.4 Conclusions .......................................................................................................................... 102 5.5 Appendix: Results of the econometric estimations .............................................................. 103 6. Policy implications ......................................................................................... 105 6.1 Introduction ......................................................................................................................... 105 Foundation for Economic and Industrial Research IOBE 4 Digital payments and tax revenues in Greece 6.2 Targeting of the policy measures ........................................................................................ 105 6.3 Fiscal impact of the proposed measures ............................................................................. 108 6.3.1 Refund of 1% in transactions with low risk of tax evasion ............................................. 108 6.3.2 Digital payments in public utilities .................................................................................. 111 6.3.3 Higher discount in transactions with intermediate risk of tax evasion .......................... 112 6.3.4 Mandatory installation of POS terminals in sectors