A report published by the think tank Africa of Ideas exposes the benefits of mobile money, able to halve the tax shortfall in West African countries according to the document.
“A 100% penetration of mobile money would be equivalent to halving the fiscal shortfall in West African countries. This is the main conclusion of a report entitled Mobilization of fiscal revenues in Uemoa, the obstacle of the informal, the lever of mobile money, published on July 24, 2017 by the think tank Africa of Ideas.
Indeed, one of the specificities of mobile money is to reduce the effects of the informal sector, by making financial flows visible, in particular those resulting from informal economic activities. These generally take place between economic agents (individuals, companies) in the form of fiat money. Once converted into electronic money using mobile money, these financial flows potentially become visible to the tax administration. Therefore, mobile money is a lever for broadening the tax base.
Remember that mobile money results from the conversion of fiat money into electronic money by means of a deposit operation in an account associated with the mobile phone number.
A better VAT recovery rate
The most striking direct effect of mobile money on the tax base is the improvement in the VAT collection rate. This is because the VAT levied on transactions paid to businesses can be better controlled. However, this presupposes that the operator automatically transmits the value of the payments intended for each company to the State.
The second source of direct effects concerns the tax revenues inherent in the marketing of mobile money services. Indeed, like most economic activities, the turnover generated by the marketing of mobile money is subject to VAT, as are the profits and, incidentally, the remuneration of the jobs created. Consequently, the commercialization of mobile money services provides the state with additional fiscal resources through VAT and income taxes levied on mobile money operators.
Rapid spread of mobile money
The authors of the report estimate that a 10% penetration of mobile money would generate tax revenues of CFAF 31.8 billion in West Africa. This value corresponds to additional tax revenues equivalent to 0.06% of the GDP of countries in the zone.
Mobile money is spreading very quickly in Uemoa, particularly in Côte d’Ivoire. According to statistics from the Central Bank of West African States (BCEAO), the number of mobile money subscribers stood at 22 million in the third quarter of 2015, against 18 million in 2014 and 11 million in 2013, or an average annual growth rate of 63%.
Founded in 2011, Africa of Ideas is a think tank that promotes reflection and debate of ideas on the economic, social and political challenges facing Africa.