B. Additional efforts for the effectiveness of the scheme
Since the inception of the credit card income deduction scheme, the government has
been exerting various policy initiatives to enhance the scheme’s effectiveness. Given
that the scheme has helped to further encourage the use of credit cards for payment by
providing tax incentives for buyers, it was necessary to provide tax incentives for
business owners as well so that buyers could make payments by credit card in more
commercial transactions. By providing tax incentives for both buyers and business
owners at the same time, the government pursued the seamless implementation of the
scheme.
From the point of the business owners’ view, cash transactions are preferable over credit
card transactions. Cash transactions provide the opportunity to attempt ‘omitted sales’ in
their income statement and tax evasion. Such practice also involves less costly
transactions because payments using a credit card incur fees payable to the respective
credit card company. Taking in account such cost burden upon sellers, the government
focused its efforts on the reduction of the cost burden by implementing various tax relief
schemes including furthering a deduction of VAT based on the amount of credit card
payments, and tax benefits for the portion of increase in reported income.