Some years back, the Republic of Korea (South Korea), implemented a scheme where retailers would pay a reduced VAT rate for payments received electronically (compared to cash). The effect of this arrangement was that Korea is one of the countries with the most advanced electronic payment infrastructure. Cash transactions, constitute a smalerl percentage of retail payments. By making electronic transactions more attractive from a tax dispensation perspective, will change behaviour towards electronic payments, reducing cash and indirectly leading to growth.
Governments should consider schemes to make cash payments unattractive from a tax perspective. This can be done in many ways, but will indirectly eliminate the bad effects of a cash economy.