part of existing year‐end tax settlement processes. Wage and salary earners can easily file year‐ end PIT settlement returns with prefilled ETP information provided by NTS and get TIETP tax refunds along with other tax credits due them.

Third, the size of tax incentives should be carefully set so that the revenue forgone for TIETP does not exceed the revenue increase gained. One way to do this is by setting thresholds and maximum ceilings for TIETP; another is by containing eligible payments of TIETP. Sophisticated tax incentive structures would ensure net gain from TIETP.

Fourth, countries wishing to introduce similar tax incentives for electronic payments should consider their citizens’ financial literacy and their financial sectors’ technological preparedness. Developing countries pursuing a cashless economy may need to make considerable efforts to establish electronic payments among the people, especially those who regard cash payment as more convenient and secure than electronic payment (Nwankwo and Eze 2013). If a majority of a country’s people are still heavily dependent on cash payments, either due to financial illiteracy, unfamiliarity with banking transactions, or lack of IT infrastructure in the financial sectors, TIETP should be introduced gradually, in line with the development of other relevant areas. In particular, in low‐income developing countries where many people do not have access to the financial sector or credit cards, instituting TIETP for credit or check cards might be challenging. In this case, ECTR could be an alternative, given that it does not require credit cards or bank accounts. Anyone who does not have a credit card or access to the financial system can pay with cash and make it electronically traceable by using a mobile phone number or ETCR card registered to the tax authorities. Technological preparedness in retail sectors and financial sectors is still prerequisite, however.

Fifth, retail vendors’ costs for installing electronic payment terminals and credit card payment fees paid to credit card companies can be a big challenge. If retail vendors are reluctant to install credit card payment terminals and accept credit cards due to high fees, increasing credit card payment will be difficult. As mentioned earlier, NTS, supported by the 1999 Income Tax Law and VAT Law, made strong administrative recommendations encouraging vendors to join credit card membership. The Korean government strongly drove lowered credit card fees,<sup>54, 55, 56</sup> which were justified with increasing credit card sales and the profits of credit card companies. In addition, tax credits for credit card sales by retail vendors, introduced in 1994, helped to relieve the burden on small retail vendors.

Sixth, tax policy makers should carefully design the tax incentive structure, keeping in mind the distortive effect of overconsumption through credit cards, which can have a negative impact on

> 54. “Lowering 1–2% of Credit Card Fees,” _Mail Economy,_ September 11, 1999.

> 55. “Government, Induce Lowering Credit Card Fees,” _Mail Economy,_ December 18, 1999.

> 56. “Credit Card Fees, Maximum 10% Lowered Within This Year,” _Dong‐a Ilbo_ , December 17, 1999.

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