Paper money and the hidden economy

Governments are looking to cut down on paper cash

 

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.

 

 

Paper money: up for destruction? Getty images

James Ratcliff is Group Editor of  Cards and Payments at VRL Financial News.

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A global marketplace: the internet represents exporting’s biggest opportunity

The advent of the internet age has made the whole world a single marketplace. Selling goods online through digital means offers British businesses huge opportunities for international growth. The UK was one of the earliest adopters of online retail platforms, and UK online sales revenues are growing at around 20 per cent each year, not just driving wider economic growth, but promoting the British brand to an enthusiastic audience.

Global e-commerce turnover grew at a similar rate in 2014-15 to over $2.2trln. The Asia-Pacific region, for example, is embracing e-marketplaces with 28 per cent growth in 2015 to over $1trln of sales. This demonstrates the massive opportunities for UK exporters to sell their goods more easily to the world’s largest consumer markets. My department, the Department for International Trade, is committed to being a leader in promoting these opportunities. We are supporting UK businesses in identifying these markets, and are providing access to services and support to exploit this dramatic growth in digital commerce.

With the UK leading innovation, it is one of the responsibilities of government to demonstrate just what can be done. My department is investing more in digital services to reach and support many more businesses, and last November we launched our new digital trade hub: www.great.gov.uk. Working with partners such as Lloyds Banking Group, the new site will make it easier for UK businesses to access overseas business opportunities and to take those first steps to exporting.

The ‘Selling Online Overseas Tool’ within the hub was launched in collaboration with 37 e-marketplaces including Amazon and Rakuten, who collectively represent over 2bn online consumers across the globe. The first government service of its kind, the tool allows UK exporters to apply to some of the world’s leading overseas e-marketplaces in order to sell their products to customers they otherwise would not have reached. Companies can also access thousands of pounds’ worth of discounts, including waived commission and special marketing packages, created exclusively for Department for International Trade clients and the e-exporting programme team plans to deliver additional online promotions with some of the world’s leading e-marketplaces across priority markets.

We are also working with over 50 private sector partners to promote our Exporting is GREAT campaign, and to support the development and launch of our digital trade platform. The government’s Exporting is GREAT campaign is targeting potential partners across the world as our export trade hub launches in key international markets to open direct export opportunities for UK businesses. Overseas buyers will now be able to access our new ‘Find a Supplier’ service on the website which will match them with exporters across the UK who have created profiles and will be able to meet their needs.

With Lloyds in particular we are pleased that our partnership last year helped over 6,000 UK businesses to start trading overseas, and are proud of our association with the International Trade Portal. Digital marketplaces have revolutionised retail in the UK, and are now connecting consumers across the world. UK businesses need to seize this opportunity to offer their products to potentially billions of buyers and we, along with partners like Lloyds, will do all we can to help them do just that.

Taken from the New Statesman roundtable supplement Going Digital, Going Global: How digital skills can help any business trade internationally

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