Cashless tax systems: voluntary vs. mandated digital payments in Eswatini

The digitalisation of tax payments is a growing policy priority in low- and middle-income countries, particularly in Africa, where revenue mobilisation remains a challenge. This study examines the impact of digital tax payments on compliance, leveraging a 2021 zero-cash-handling mandate in Eswatini. Using administrative tax data, we evaluate two key questions: (i) how voluntary adoption of digital payments affects compliance and (ii) the impact of mandating digital tax payments. We employ a staggered difference-in-differences (DiD) approach for voluntary adoption and a treatment-intensity DiD strategy to assess the mandate’s effects. Voluntary adoption significantly improves compliance, reducing late payments by 19–20% points (25–30 per cent reduction) and increasing payment accuracy (paying the tax liability in full) by 5.6% points (20 per cent), but for strictly digital payments only. Effects on tax amounts paid are less consistent, but the fully controlled broad-digital specification implies an increase of approximately 32%. The mandate, by contrast, eliminated cash payments and is associated with an approximately 17% increase in tax paid on average. While companies pay more taxes, they also worsen their payment accuracy, while individuals are more likely to pay their tax liabilities in full after adoption. These findings highlight distinct compliance patterns between voluntary adopters and those compelled by enforcement. The results underscore the importance of designing digital tax policies that account for taxpayer heterogeneity and behavioural responses to maximise compliance gains.