Politics 4 April 2012 Paper money and the hidden economy Governments are looking to cut down on paper cash Print HTML Not many builders accept credit cards - for some reason they really don't like having all those receipts lying around. It isn't just the super-rich who are causing HMRC problems with their tax avoidance strategies. The so-called "hidden economy" is an equally big problem for governments across the world. And it is that untraceable folding money that enables it. As such, governments with the biggest economic problems are increasingly looking to cut cash in circulation and encourage the use of electronic payments. In Italy tax evasion is estimated to be 22 per cent of GDP. Part of Mario Monti's economic reforms agenda has been designed to reduce the amount of cash in system by increasing the volume of electronic payments made at the point of sale. In practice, this means imposing a cap on merchant service fees - the processing charges retailers are required to pay on card transactions. The more people use electronic payment methods, the harder it is to hide from the tax man. The Italian government hopes to win the support of the retailers in encouraging consumers to use their cards more regularly. Winning that support is not easy - retailers like cash in their pockets like everyone else. That is why many smaller retailers still impose minimum spends for customers wishing to use their cards. But the advent of contactless payments is changing that, and in the UK, many high-volume, low value retailers (like cafes) are now encouraging people to "tap and go", even for purchases of £1 or £2. Some governments around the world have their work cut out in the war on cash, even by Italian standards. For the banking and payments sector Nigeria is one of the world's biggest boom markets. Debit cards and electronic payments are big business out there as the government faces the seemingly impossible task of cracking down on corruption. This is certainly a difficult task in a country that runs on brown envelope deals, and has a reputation as a breeding ground for internet scammers. But no-one can accuse the government of half measures. The Central Bank of Nigeria is seemingly unphased and unstoppable. Arrests of senior bankers is a regular and high-profile. And unlike the Italians, they aren't interested in incentivising people to move to electronic payments methods. Their methods are altogether more direct, replacing the carrot with the stick Huge penalties are being levied on cash withdrawals of over NGN150,000 (£600) at ATMs. Businesses accepting cash payments of more than NGN 1m (£4,000) are being charged 20 per cent for the privilege. The initial results have been mixed, but what is certain is that Nigeria's government is fighting fire with fire. › Mad Men: season 5, episode 3 Paper money: up for destruction? Getty images James Ratcliff is Group Editor of Cards and Payments at VRL Financial News. Subscribe More Related articles Chinese loan sharks are using nudes as collateral. Is this the grim future of revenge porn? Tea Leavers and Champagne for Remain: what your shopping basket says about your EU stance “I’m a big boy”: What happened when MPs grilled Philip Green about the BHS scandal?