The implications of adopting a European Central Bank Digital Currency: A Tax Policy Perspective

Abstract

In the wake of growing interest around cryptocurrencies, the possible issuance by central banks of their own digital currency has been a topic of debate worldwide. However, little attention has been given to the relevancy of electronic and digital payments (including a possible digital euro) in the area of taxation, where policies limiting the use of cash are being intensively adopted all around the world. On one hand, tax policies fostering the use of electronic and digital payments as a Central Bank Digital Currency (CBDC) can help tax authorities to better monitor taxpayers’ transactions in the fight against tax evasion and fraud. On the other hand, important concerns arise in the areas of data protection and the digital divide. These two kinds of concern should be taken into account and addressed by policymakers before the adoption of both a CBDC and tax policies favouring its use at the detriment of cash. CBDC – Digital Currencies – Cashless Payments – Electronic Payments – Tax Policy – Exchange of Information – Taxpayers’ rights – Data Protection – GDPR – Digital Divide