Resilience in public finance: digital reporting of cash sales in restaurants

The digital registration of cash sales provides tax authorities with real-time data on business cash income, which is crucial for fighting against tax evasion. Using the Czech Republic as a natural experiment, our study examines whether this measure increases the value of card payments and thus reduces the concealment of cash sales. We analyzed the banking association’s time series data about card transactions from 2015 to 2023. For our calculations, we also used other variables such as the covid stringency index, the digital economy and society index, the number of issued cards, the number of ATMs, and the number of payment terminals. Our findings show that after abolishing the digital registration of cash sales in the Czech Republic in 2022, the value of card payments in the restaurant industry decreased by 3.8 billion CZK (0.152 billion EUR) in the period between 1Q2022 and 4Q2023. This decline in the value of card transactions indicates that merchants have again begun to conceal and not tax their own income. Our analysis contributes to the policy debate on the advantages and disadvantages of this measure and proves its effectiveness in combating tax evasion.