Taxing Mobile Money: Theory and Evidence

ByMichael Barczay,Shafik Hebous,Fayçal Sawadogo,Jean-François Wen

December 5, 2025

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject:Effective tax rate, Financial inclusion, Financial markets, Mobile banking, Revenue administration, Tax policy, Taxes, Technology, Transaction tax

Keywords:Africa, Effective tax rate, Financial Inclusion, Global, IMF working papers, Mobile banking, Mobile Money Tax, money adoption, money tax, money use, novel transaction, Transaction tax, Transaction Taxes

Publication Details

• Pages:

  55

• Volume:

  2025

• DOI:

  https://doi.org/10.5089/9798229030717.001

• Issue:

  255

• Series:

  Working Paper No. 2025/255

• Stock No:

  WPIEA2025255

• ISBN:

  9798229030717

• ISSN:

  1018-5941