In recent years, the expansion of non-cash payments in Azerbaijan has become one of the main directions of state policy. The increase in digital payments, the proliferation of POS terminals, and tax incentives are aimed at accelerating this process.
It is of interest whether the decisions made regarding cashless transactions have a real economic effect and whether they have the expected impact on the reduction of the "shadow economy".
In a statement to Modern.az, **Vugar Bayramov**, a member of the Milli Majlis Committee on Economic Policy, Industry, and Entrepreneurship, stated that increasing the share of non-cash payments is a government priority:
“Practically, in recent years, we have observed an increase in the amount paid back in "VAT refund", which indicates that the number of our citizens using plastic cards has increased. On the one hand, this leads to the "whitening" of retail trade turnover and a decrease in the share of cash payments. The reduction in the share of non-cash payments is unequivocally important for minimizing the shadow economy. This is because it also allows for the tracking of funds and increases transparency. Consequently, it enables more funds to flow into the state budget. At the same time, it naturally leads to the formation of a tradition among our citizens regarding the use of plastic cards. This, of course, is one of the very important points. In this regard, the increase in the number of non-cash payments is unequivocally one of the main goals and directions in economic reforms.”
The parliamentarian noted that there will be increases in this direction in the coming years:
“Our citizens place online orders not only with plastic cards but also via the internet. This even affects non-cash payments. Moreover, considering that a digital financial system has already been formed, this will also serve to increase transparency in the expenditure of state budget funds. Therefore, digitalization will directly impact payments not only between businesses and the government but also among government agencies, which will enable more transparent expenditure of budget funds.”
According to **Mushfig Jafarov**, another member of the Milli Majlis Committee on Economic Policy, Industry, and Entrepreneurship, improving the non-cash payment system and, in this context, minimizing cash payments as much as possible, is of great importance in today's new digital world agenda:
“In recent years, the population of Azerbaijan has also widely utilized modern innovations in this field. In recent years, a purposeful policy has been pursued in our country to increase the scale of non-cash payments. Thanks to this system, tax evasion is prevented, more funds are collected for the budget, and financial discipline in the country's economy is strengthened. The funds collected for the budget are then directed towards the social welfare of the population. Despite the measures taken regarding non-cash payments in recent years, cash payments still persist in some areas, and instances of tax evasion occur. Currently, a system for refunding VAT paid on goods purchased in the retail trade sector is being implemented across the country. In this regard, the changes expand the scope of VAT amounts refunded to consumers and also positively impact the increase in the volume of refunded VAT.”
According to the deputy, electronic transfer of funds is one of the factors ensuring the transparency of the economy:
“The fact that banks, in turn, are interested in developing cooperation with fintech (financial technologies) participants confirms this.
Generally, the "shadow economy" negatively affects and harms the financial system. The "shadow economy" primarily damages the tax base. This process negatively impacts the transparency of accounting, and the deepening problem of transparency creates serious risks for financial stability. In addition to negatively affecting budget revenues, the "shadow economy" is considered a serious risk for a sustainable financial system.”
Economist expert **Akram Hasanov** stated that cashless transactions have had a certain effect:
“The volume of non-cash transactions is being increased. The state has been able to achieve this through various means. As a result of a certain portion of Value Added Tax (VAT) being refunded to more consumers, especially during non-cash payments, citizens make more non-cash payments at retail outlets. Yes, there is success in this area.”
According to the expert, although there has been a certain effect in the direction of cashless transactions, it is not at the desired level:
“Some entrepreneurs cannot withdraw more than 15,000, and some more than 30,000, from the bank per month. Thus, because entrepreneurs cannot withdraw their money, they are forced to carry out more non-cash transactions. It should also be noted that as a result of these steps, the volume of the "shadow economy" has decreased to a certain extent. However, we are not talking about a significant reduction. There is a problem because the overall economic situation in the country is not good. Entrepreneurs are inclined towards the shadow economy, and ordinary citizens are inclined towards informal incomes, because the tax burden is high. To summarize, yes, there is a certain effect, but it is not at the expected level.”
