Tax evasion is a crucial issue worldwide. It is facilitated by the cash economy, as cash is untraceable and allows individuals to easily conceal the history of their transactions, thus facilitating underreporting. Conversely, cashless payments are traceable, which makes evasion more difficult. Despite increasing interest from policy makers, the literature on the impact of payment instruments on tax evasion is still scarce and fragmented. This paper therefore presents a systematic literature review on the topic. More specifically, we analyze 26 papers published in peer-reviewed journals, which document that cash has a positive impact on tax evasion and the shadow economy whereas card payments foster value added tax compliance. Other topics, such as the impact of digital wallets and central bank digital currencies on tax evasion, prove to be rather neglected. Finally, we discuss which policies can be introduced by policy makers to reduce tax evasion, and we provide suggestions for future research.