Taxing Mobile Money: Theory and Evidence
IMF Working Papers, December 5, 2025
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- Taxing Mobile Money: Theory and Evidence
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Bibliographic details
- Authors: Michael Barczay, Shafik Hebous, Fayçal Sawadogo, Jean-François Wen
- Published: December 5, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229030717.001
Overview
- Mobile money is a central digital alternative to traditional banking in developing countries.
- Several African governments have introduced taxes on mobile money transactions.
- The authors develop a model and provide empirical evidence using cross-country survey data and transaction-level data from Cameroon, the Central African Republic, and Mali.
- Key quantified result: the excess burden of the tax is quantified at 35% of revenue.
Theoretical framework and predictions
- Model characterizes how transaction taxes affect payment choices and generate excess burden.
- Predicted behavioral responses:
- Taxation reduces mobile money use.
- Elasticities are shaped by access to substitutes and transaction costs.
- Banked users substitute into formal alternatives.
- Unbanked users face higher effective costs, making the tax regressive.
- Taxation induces substitution into cash, raising informality.
Empirical evidence
- Data sources:
- Cross-country survey data.
- Novel transaction-level data from Cameroon, the Central African Republic, and Mali.
- Main empirical findings:
- Sharp declines in mobile money usage following taxation.
- Stronger usage responses among the banked relative to the unbanked.
- Unbanked and rural users bear a disproportionate burden of the tax.
Quantification of efficiency and distributional costs
- Using empirical estimates, the paper gauges the excess burden of mobile money taxation.
- Quantified excess burden: 35% of revenue.
- Distributional implication: the tax is regressive, with higher effective costs for unbanked and rural users and substitution toward cash increasing informality.
Policy implications
- Taxing mobile money generates significant efficiency costs relative to revenue raised.
- Regressivity concerns: unbanked and rural populations are disproportionately affected.
- Substitution into cash suggests potential increases in informality, undermining tax base and policy goals.
Source: Michael Barczay, Shafik Hebous, Fayçal Sawadogo, and Jean-François Wen, "Taxing Mobile Money: Theory and Evidence" (IMF Working Paper, December 5, 2025).
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