Mobile money is a booming industry in Africa, with potential benefits for economic development and financial inclusion. Facing strong fiscal headwinds, a growing number of African countries have introduced taxes on mobile money and other digital financial services (DFS), some of which have generated strong resistance. Critics are concerned that such taxes may attenuate the growth in DFS and disproportionately impact the lowest income households. ICTD explored the impact of different approaches to DFS taxation in Africa through its DIGITAX programme, which ran from 2020 to 2024. The DIGITAX team and a network of independent researchers conducted research in Cameroon, Côte d’Ivoire, Ghana, Kenya, Nigeria, Tanzania and Uganda, as well as desk-based research with a broader geographical scope. This policy brief summarises the programme’s research findings and policy analysis.
Key messages
- The revenue raised from taxing mobile money is modest, but not insignificant. Typically, it amounts to around one per cent of tax revenues. These figures often fall well below expectations, illustrative of weak forecasting, uncertainty about the design, and compliance challenges.
- Impacts on market growth are real, but limited and temporary. Growth in transaction volumes and values has tended to recover back to pre-tax levels, with the temporary slowdown leaving absolute levels of usage modestly below where they would have been if the pre-tax growth rate had been sustained. That said, taxing DFS more heavily than conventional financial services, as is often the case, may distort the market in ways that deter even greater uptake.
- The incidence is likely to be greater on market participants with lower incomes. This is especially the case where the tax is set at a fixed percentage of the fees charged by operators, because those fees constitute a larger proportion of smaller value transactions. Even a flat rate on transaction values may be regressive if people on lower incomes disproportionately engage in the transactions on which it is levied. However, steps can be taken in the design of mobile money taxes to mitigate this.
- Perceptions affect users’ response to taxes. The public and political debate about mobile money taxes when they are introduced can have a long-lasting impact on attitudes to them, even if the design is modified in response to that debate. Such attitudes, together with imperfect understandings of how a tax works, shape how users act. Knowledge and attitudes may prevent users from reacting to exemptions and other incentives in the ways intended by policymakers.
