Finance minister Tadeusz Kościński at the Cashless Congress said that cashless transactions limit the shadow economy and increase state revenues. In 2018, according to EY, lost tax revenues from the shadow economy, which can be limited by non-cash payments, amount to nearly PLN 31 billion.
As Kościński emphasized during the opening of the VIII Cashless Congress in Warsaw, roads, hospitals and kindergartens can be built thanks to the reduction of the shadow economy and increasing tax revenues. He declared that the Ministry of Finance supports “not only cashless but also paperless economy”, which is reflected in the introduction of virtual cash registers and e-receipts. He estimated that Poland is one of the leaders in non-cash payments in the world.
The congress also presented the results of the EY research on the impact of non-cash payments on reducing the shadow economy and the tax gap.
As Marek Rozkrut from EY pointed out, when we talk about the shadow economy, we mean the unregistered added value that arises in the economy. It is about transactions, manufactured products or services rendered that have not been registered, for which there is no receipt or invoice, and the taxes and contributions due have not been paid. The expert noted that these analyzes do not concern the gray area in the labor market, which is a separate issue.
“The common feature of the vast majority of transactions in the shadow economy is that they are carried out using cash payments, because cash makes it possible to hide this transaction and not pay taxes,” he said. As he described, the gray area is divided into active and passive, which differ greatly in terms of the role that non-cash payments can play in reducing them. According to Rozkrut, the passive part of the shadow economy is characterized by the fact that only the seller is the beneficiary of a gray-zone transaction, and the buyer may not even be aware that he is participating in such a transaction and does not benefit directly from it.
As Rozkrut pointed out, the popularization of electronic payments solves this problem, because with such a payment the transaction – as a rule – is registered.
According to the expert, the situation is different in the active part, because both parties to the transaction are aware of participating in the shadow economy and agree that the payment will be cash, and the buyer gets, for example, a discount on a construction service. Here – as the expert said – other measures are needed to limit the shadow economy: apart from control mechanisms, e.g. educational campaigns for consumers.
He pointed out that, according to the EY research, the passive part of the shadow economy is dominant in higher-income countries, and the lower the income, the greater the popularity of the active shadow economy.
– Our estimates show that while the shadow economy decreased after Poland’s accession to the EU, this process stopped after the financial crisis, and then this decline has been gradually continued since 2011 – he said.
EY analyzes show that in 2018 the shadow economy amounted to 10.8%, the vast majority of which is the cash gray area. He noted that the vast majority of the shadow economy in Poland may be limited by promoting electronic payments.
As Rozkrut said, the estimate for 2018 shows that the lost tax revenues from the shadow economy are over PLN 38 billion at prices from that year, and the passive shadow economy, which can be limited by non-cash payments, is nearly PLN 31 billion, with of which over PLN 21 billion from VAT.
He assessed that when it comes to the VAT collection gap in Poland, most of the gap comes from the so-called tax fraud has been eliminated, and the one that has remained is due to a gap in the shadow economy.
He emphasized that reducing the passive shadow economy not only contributes to increasing the state’s tax revenues, but also makes competition in the market fairer.
As he said, there is still a lot to do in Poland in terms of promoting cardless payments and the availability of payment terminals. – If the network of terminals were completed, then the reduction of the passive gray zone would be approx. 0.7%. GDP, this would translate into an increase in the revenues of the public finance sector by at least PLN 1.8 billion – he said.