Cash register law crashed

A recently published study from Jönköping International Business School (JIBS) at Jönköping University has shown that the introduction of cash registers requirements in Swedish businesses resulted in an immediate increase in turnover. This increase is interpreted as businesses beginning to report a larger proportion of their total income, suggesting a reduction in tax evasion. However, the effect was relatively small and diminished after a few months.

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In-depth interviews with business owners indicate that many believe the cash register requirements have reduced tax evasion and improved competitive conditions. At the same time, tax evasion still occurs, for example by not registering all transactions or recording lower amounts. Relatively low fines for incorrect use of cash registers do not seem to deter everyone from breaking the rules.

Data from the Swedish Tax Agency

The study used data from the Swedish Tax Agency on businesses in various sectors, particularly cash-intensive industries such as restaurants and hairdressers. By comparing companies' revenues before and after the introduction of cash registers, while also controlling for other factors such as seasonal effects, the researchers were able to isolate the effect of the cash register requirement. The results show that companies' turnover increased by approximately four per cent during the first months after the introduction of cash registers. However, after a few months, companies' reported revenues fell back to pre-introduction levels, indicating that businesses found other ways to underreport their income after an adjustment period.

"The results thus suggest that the cash register legislation led more companies to at least initially report a larger share of their actual income. A contributing factor may have been that the Swedish Tax Agency conducted a number of unannounced inspections in connection with the introduction of the cash register requirement. But after a while, businesses seem to have adapted to the new technology and found other ways to under-report their income," says Johannes Hagen, Associate Professor of Economics at JIBS and one of the researchers behind the study.

Under-reporting of income means lost tax revenue. Value-added tax (VAT) is one of the taxes that is often under-reported globally. According to a study, approximately 5.3 per cent of the VAT base was missing in the EU in 2021. To combat VAT fraud, several countries have introduced requirements for certified electronic cash registers.

Complements other studies

"Our study complements other types of studies, such as surveys, in-depth interviews, and tax audits, on how the cash register requirement has contributed to reducing tax evasion and protecting legitimate businesses. A solid knowledge base is important for the Swedish Tax Agency when considering new guidelines for the design of cash registers and complementary measures, such as unannounced on-site visits and inspections," says Andrea Schneider, Associate Professor of Economics at JIBS.

Although the study provides insights into the effects of the cash register requirement, more studies in the area are needed. The data in the study is somewhat outdated, as the focus was on the introduction of the requirement. The payment landscape has also changed significantly with decreased cash usage and increased use of electronic payment methods such as Swish. Through continued research, a better understanding can be achieved of how technical and regulatory changes affect tax evasion and businesses' reporting behaviours, thereby contributing to the development of more effective strategies to combat economic crime and protect fair competitive conditions.


The study, "Effects of electronic cash registers on reported revenue," was conducted by JIBS researchers Johannes Hagen, Associate Professor of Economics, Andrea Schneider, Associate Professor of Economics, Alireza Khoshghadam, PhD candidate in Economics, and Uppsala researcher Per Engström, Associate Professor of Economics. It is published in International Tax and Public Finance.