In recent years, mobile money has emerged as a transformative force in Africa’s financial landscape, providing millions with access to essential financial services. However, as governments seek to capitalize on this growth through taxation, concerns arise regarding the impact on financial inclusion and the informal economy.
In Zambia, the government announced a tax on mobile money transactions, which is expected to generate significant revenue. Felix Mutati, Zambia’s Minister of Technology and Science, stated, “With telephone transactions projected to rise to 170 billion kwacha in 2022, we must seize this opportunity to replenish government coffers.” This move reflects a broader trend across Africa where mobile money is increasingly viewed as a potential source of tax revenue.
However, industry leaders warn that such taxation could have unintended consequences. Postle Jumbe, president of the Alliance of Zambia Informal Economy Association (AZIEA), cautioned that “imposing a tax on mobile money means that people will pay more. This could slow down the rapid digital transformation taking place in the country.” This sentiment resonates with findings from various studies indicating that higher taxes may deter usage among low-income individuals who rely heavily on mobile money for daily transactions.
The implications of taxing mobile money extend beyond Zambia. In Kenya, an excise duty introduced in 2013 significantly impacted transaction behaviors. Although overall transaction amounts remained stable, survey data revealed that users sent and received money less frequently within households. This shift disproportionately affected poorer households that were already struggling with financial inclusion. As highlighted in a study by the Institute of Development Studies (IDS), “while the amounts transacted may not change, users send and receive money within households less regularly.”
Stephen Chege, chief officer for regulatory and external affairs at Vodacom Group, emphasized the importance of understanding these dynamics: “Taxing mobile money could have unintended consequences for the people who stand to benefit significantly from these platforms.” He noted that platforms like M-Pesa have been crucial for enhancing financial inclusion across the continent. However, he warned that excessive taxation could undermine these gains.
The challenge for policymakers is to design tax systems that balance revenue generation with the need to promote financial inclusion. Research indicates that while taxation can formalize transactions and broaden the tax base, it must be approached cautiously. The International Centre for Tax and Development (ICTD) suggests that tax policies should be tailored to specific contexts and user needs to avoid adverse effects.
As mobile money continues to grow—781 million registered accounts in sub-Saharan Africa as of 2023—governments must tread carefully. A well-designed tax regime could support sustainable growth in this sector without stifling innovation or accessibility. The GSMA reports that mobile money transactions reached $1,260 billion globally in 2022, underscoring its significance as a financial tool.
While mobile money presents an opportunity for increased government revenue through taxation, it is essential for authorities to consider the broader implications on financial inclusion and economic growth. Engaging with stakeholders from various sectors can help create a balanced approach that fosters both compliance and accessibility in this rapidly evolving financial landscape.
