Vodacom argues that mobile money taxation could hit financial inclusion

Vodacom argues that mobile money taxation could hit financial inclusion

Published last week but now attracting attention from many African news resources is a Vodacom Group paper arguing that mobile money taxation could hamper financial inclusion gains in Africa.

This isn’t a new theme, of course. Nor is it surprising that it comes from one of the biggest mobile operators in Africa with a strong interest in the M-Pesa brand, the first and most successful mobile money payment service on the continent, with 52 million subscribers. 

Recent years have seen an acceleration of the digital economy, due to the Covid-19 pandemic and Vodacom reserves positive comment for governments that have provided “sound and enabling policy frameworks over the years to allow for innovative solutions that empower citizens”.

However, it also suggests that the trend of mobile money taxation and levies is spreading across Africa and gives a number of examples of this, warning that some government tax policies pose a significant challenge to the sustainability of mobile money services and financial inclusion gains made by these innovations.

In its paper the Vodacom Group notes that accessibility and affordability are two of the major draw cards of mobile money on the continent, giving people access to the most basic financial services. It also warns that mobile money taxation could mean an increase in the fees associated with using these services. This could make them unaffordable, hitting both end users, many of whom are likely to be highly sensitive to transaction costs, and mobile money providers’ ability to make the investments necessary to provide services to the underserved.

The company also points out that, while these taxes are targeting mobile transactions because of their high volume, the value per transaction is typically quite low. It suggests that taxation on mobile money transactions is unlikely to significantly expand the tax base and calls for sound and carefully implemented policies around mobile money taxation.

The Mobile Money Taxation Report is available on the Vodacom website.

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