To the age-old question of whether the increased state revenue in 2024 is due to economic growth, inflation, or improved tax compliance, the answer is… POS terminals and myDATA!

Last year, businesses and professionals discovered POS terminals, as entire sectors (such as street vendors, taxis, etc.) saw more than triple the revenue via card payments instead of cash. In some sectors, the annual increase even hit 2,500%!

This may better explain why, according to the special report published yesterday by the Independent Authority for Public Revenue (AADE):

• Business-declared revenue increased by 5.8% compared to 2023, exceeding the combined annual inflation and GDP growth of that year (2.6% + 2.6% = 5.2%). This is attributed to the linkage with cash registers and the automatic recording by tax authorities of all POS transactions in 2024.
• Declared expenses (which reduce taxable income) increased by 4.1% in 2024, remaining below the combined inflation and growth. This is mainly due to the online recording of all 2024 invoices, replacing handwritten “paper” declarations.
• The “net” VAT tax base (revenue minus expenses) increased by nearly €9.9 billion or 12% year-on-year—more than double the rate of revenue growth (5.8%).
• Despite the surge in taxable base and the additional €2.66 billion in VAT assessed in 2024, the collection rate remained consistently high at 91.3%. In other words, 9 out of 10 euros in VAT went directly to the state instead of ending up in under-the-table business transactions.

According to the study, at least one-third of the annual VAT revenue increase in the 2023–2024 period is due to improved tax compliance—meaning that the remaining two-thirds are linked to economic growth and inflation.

In previous years, whether due to growth, inflation, or increased tax rates, state coffers would have struggled to see such revenue hikes, as collections often changed hands or went down different paths.

The big difference in 2024? The market discovered “POS everywhere.”
And according to the same report, these POS terminals “eliminated” €5.28 billion in cash compared to 2023.

Specifically, in 2024:

• The retail sector recorded the highest annual increase (+€3.11 billion) in card payment revenue.
• The food service and accommodation sectors also saw significant annual increases—€1.47 billion and €567 million respectively.

The report emphasizes that electronic transactions through card payments increased by €8.3 billion between 2023 and 2024, reaching €47.7 billion last year compared to €39.5 billion in 2023.

These figures, transmitted by banks, don’t reflect the full scope of electronic transactions across the economy. Still, they reveal a significant upward trend over the past two years. Of these payments, 93% relate to the tertiary sector (services and commerce).

Out of 241 sub-sectors (from a total of 282 in the tertiary sector), an increase was recorded in card revenue.

Notable examples include:

• Computer consulting services (+2,459%), likely linked to prepaid vouchers for business upgrades distributed in 2024
• Operation of entertainment venues (+469%)
• Taxi services (+221%)
• Retail sales in street markets (+271%)
• Supporting activities for performing arts (+148%)
• Inland passenger water transport (+101%)
• Mail-order or online retail (+82%)
• Fitness facilities (+81%)

The 30 sectors with the largest estimated decrease in cash usage between 2023 and 2024 include food, tobacco and beverage retail, food service and beverage providers, fuel retail, clothing retail, hotels and accommodations, and computer consulting services.

Drawing on findings from an IOBE study, the AADE report estimates that every €10 increase in electronic payments yields €0.67 in VAT revenue that would otherwise have gone undeclared. It also highlights that “the replacement of €5.78 billion in cash with card payments in 2024 appears to contribute an additional €388 million in VAT revenue due to improved compliance.”

According to the study:

• Tax evasion has traditionally been linked to higher rates of cash use. Indeed, paying in cash allows both parties to avoid issuing receipts and withhold taxes. However, only part of cash transactions represent shadow or undeclared activity.
• The increase in electronic payments does not automatically lead to higher compliance. For some of the increase in card-based revenue to reveal previously hidden taxable income, these additional electronic payments must replace transactions that would have previously been made in cash. To achieve this, the growth rate in card-based revenue must outpace the growth of total turnover. In other words, the value of electronic transactions as a percentage of total output must increase between the two periods.