Between revenue and financial inclusion: Africa is reshaping its digital money tax policies.
African countries are seeking a balance between increasing tax revenues
Written by Mohamed Omran
With the rapid expansion of mobile money services in AfricaGovernments face a complex equation between the need to increase tax revenues and maintain the momentum of digital growth and financial inclusion.
Africa is reshaping its digital money tax policies.
E-wallets have become an essential tool for millions of Africans to conduct daily transactions. The experiences of several countries have shown that imposing high taxes on digital transfers may lead to counterproductive results, most notably a decline in the use of electronic services and a return to the informal cash economy. In light of this debate, African countries and international institutions are moving towards reassessing digital tax policies, in search of a model that balances stimulating the digital economy and ensuring sustainable financial resources for the state.
The call for moderate taxation of mobile money is gaining momentum across Africa, as evidence suggests that excessive taxation of digital transactions often leads to a significant decrease in use and a return to cash-based economies.
In Uganda, the imposition of a 1% tax in 2018 led to nearly half of the users abandoning the service within two weeks, while Ghana recently saw the complete abolition of the electronic transfer tax in April 2025 following a sharp decline in transaction volume and angry public reactions.
These cases highlight a growing consensus among international institutions, such as the International Monetary Fund and the United Nations Economic Commission for Africa, that while mobile payment services are an attractive source of revenue for debt-laden governments, imposing heavy taxes could inadvertently shrink the tax base by pushing the economy back into the informal, hard-to-track cash sector.
Instead of directly targeting transactions, a new wave of financial strategies is focusing on using the 514 million active mobile payment accounts in sub-Saharan Africa as a tool to formalize the economy.
Research conducted in 2025 indicates a strong positive relationship between higher levels of financial inclusion and growth in overall tax revenues, suggesting that lower transaction costs encourage wider use of the digital records needed for tax compliance.
Kenya has emerged as a successful alternative model, using mobile payment data and artificial intelligence to combat VAT fraud, a move that reduced fraud by approximately 30% without placing a direct financial burden on low-income populations, who rely primarily on digital wallets.
Digital money tax policies
The debate among African policymakers has shifted from the question of taxing the digital economy to how to do so without harming the most vulnerable groups.
While countries like Zimbabwe still rely heavily on remittance taxes as a source of income, other countries such as Rwanda and South Africa are increasingly prioritizing data-driven compliance systems over direct fees.
The biggest challenge for these administrations is to leverage digital finance as an infrastructure for long-term economic growth, while ensuring that the pursuit of immediate financial gains does not undermine the systems that have brought millions of unbanked citizens into the formal financial system.
