Tax Implications of Cashless Payments: Micro Evidence from Africa

Digital financial services have transformed financial inclusion across low- and middle-income countries. In Africa, mobile money (MM) allows millions of people and businesses to transact digitally without a traditional bank account. Yet little is known about what this means for tax administration and revenue collection, although many African governments face pressure to increase domestic revenue, while private payment providers and regulators are investing heavily in digital payment ecosystems.

This study focuses on digital merchant payments (DMPs), e.g. MM, card payments, and bank transfers used in business-to-consumer transactions. DMPs matter for taxation because every digital transaction can leave a data trail. For tax agencies, this can improve the visibility of business activity, reduce reliance on self-reported information, and strengthen taxpayer services and enforcement. For firms, DMPs can simplify bookkeeping, lower compliance costs, and make liabilities more predictable. DMPs could also shape businesses’ perceptions of tax systems in terms of fairness, reciprocity, and compliance.

Using data from roughly 6,000 formally registered firms in Burkina Faso, Ghana, Rwanda, Tanzania, and Uganda, we map how businesses use DMPs, identify the main correlates of adoption, and explore whether DMP use is associated with tax-related attitudes such as fairness, fiscal exchange, and tax morale. Our analysis is correlational rather than causal, but offers one of the first cross-country quantitative assessments of these links in Africa.