What Does It Take To Go Cashless?

Now what could that incentive be?

It could be a nominal 5 percent set-off on tax payable by those who spend more than 80 percent (or some other threshold) of their income in cashless transactions. This can be quite easily determined. A routine bank statement showing non-cash and cash debits separately would do. No new hassle this. Tax payers do furnish personal banking information showing interest income accrued and tax payable or deducted. So administering such incentive should involve no extra load, either on the banks or on the taxpayer.

Overall, rewarding of non-cash spending through a tax incentive should have a wholesome effect. It will help foster transparency, bring greater efficiencies in financial transactions and boost the economy and revenues. In particular, it would be welcomed by vast numbers of people who spend tax paid money from bank accounts.

For once, the government would have targeted a tax exemption on the honest taxpayer -- a small bonus to demand cashless transaction while shopping. The greater the transaction value, the more the incentive for the customer to go cashless. Also, a shop not accepting card or cheque runs the risk of losing business to the next shop.

Already, banks charge for many a non-ATM transaction and need not worry on this score. Digital infrastructure is in place, and added volumes will only reap greater economies of scale. New innovations are leveraging the spread of mobile technology, and growing numbers of small vendors across the country can now transit to the world of cashless business.

In what's win-win for all, enforcement agencies also will now have reason to smile. More and more transactions would become accountable, covering both the spender and the recipient. In particular, from the indirect tax perspective, all sales transactions will be traceable.

Going forward, cash withdrawal subsidy need not be limited to the middle class and the affluent. Increased cheque and electronic transactions may help release subsidy funds to support low cost banking channels for the urban and rural poor. But then that would be another story.

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