Limiting the Use of Cash for Big Purchases: Assessing the Case for Uniform Cash Thresholds
Peter Sands, Haylea Campbell, Tom Keatinge and Ben Weisman
For all the hype about electronic payment systems, cash remains by far the world’s most popular financial transaction mechanism. However, over the past year there has been an intensification of the discussion about the role of cash in society. Cash has great advantages: it is familiar; simple to use; and ubiquitously accepted. But cash also has downsides: as cash transactions leave no record, cash plays a critical role in money laundering, tax evasion and terrorist financing.
The purpose of this paper is to provide a critical assessment of the case for cash thresholds – legal limits on the size of transaction for which cash can be used – and to evaluate whether such thresholds should be set at a uniform level across countries. This is a live policy debate within the EU. Some member states, such as France, Belgium and Italy, have already introduced cash thresholds at levels between €1,000 and €15,000. In others, such as Germany, the idea has triggered fierce opposition.
Thus far, the arguments for such legislation, at least at EU level, have largely been framed within the broader objective of implementing a common counterterrorist financing strategy. The arguments against have typically focused on the infringement of privacy and individual liberty and the belief that such thresholds are a step towards eliminating cash altogether. Yet there has not been much considered assessment of the arguments for and against cash thresholds that looks more broadly at the potential impact of such thresholds on tax evasion and financial crime and the possible disruption of legitimate economic activity.