Abstract:

The impact of digital financial instruments on the legalization of illicit financial flows has remained under-investigated so far, which makes this study relevant. The study aims to analyze the impact of the level of cashless payments on the legalization of the tax base for personal income tax in Russia. The study proceeds from a hypothesis that an increase in cashless payments should have a positive impact on the legalization of the tax base for personal income tax. Possible causes of the increase in personal income tax payments were verified. An analysis of statistics showed that wages (including shadow wages) grew insignificantly between 2014 and 2018, so this factor could not have the determining role. The authors supposed that the main trigger of higher tax payments was the shrinking of unreported pay. Further analysis confirmed a correlation between an increase in bank card transactions and a higher assessed amount of personal income tax. The key conclusion of the study is that the legalization of the tax base for personal income tax happened as a result of greater transparency of financial flows thanks to the spread of cashless payments and the adoption of online cash registers.