Taxing Mobile Money: Theory and Evidence

Michael Barczay, Shafik Hebous, Fayçal Sawadogo and Jean-François Wen

No 2025/255, IMF Working Papers from International Monetary Fund

Abstract: Mobile money has become a central digital alternative to traditional banking in developing countries, yet several African governments have introduced taxes on mobile money transactions. We develop a model that characterizes how such taxes affect payment choices and generate excess burden. The model predicts that taxation reduces mobile money use, with elasticities shaped by access to substitutes and transaction costs: banked users substitute into formal alternatives, while unbanked users face higher effective costs, making the tax regressive. Taxation also induces substitution into cash, raising informality. We empirically test these predictions using cross-country survey data and novel transaction-level data from Cameroon, the Central African Republic, and Mali. Results show sharp declines in mobile money usage, with stronger responses among the banked. Unbanked and rural users bear a disproportionate burden. We use the empirical estimates to gauge the excess burden of the tax, which we quantify at 35% of revenue—highlighting its significant efficiency cost alongside its regressive impact.

Keywords: Mobile Money Tax; Financial Inclusion; Transaction Taxes; money tax; IMF working papers; money adoption; money use; novel transaction; Mobile banking; Transaction tax; Effective tax rate; Africa; Global (search for similar items in EconPapers)
Pages: 55
Date: 2025-12-05
New Economics Papers: this item is included in nep-fdg, nep-iue, nep-mon, nep-pay and nep-pbe
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=572369 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2025/255

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().