Taxing Mobile Money in Senegal: A Risky Reform with Heavy Social Consequences

By Ajong Mbapndah L

As the Senegalese government seeks to restore its public finances through an ambitious Economic and Social Recovery Plan (PRES), one of the key proposed measures — the taxation of Mobile Money transactions — is already raising serious concerns. While it may appear justified given the current budgetary context, this reform risks being counterproductive, particularly in terms of financial inclusion and digital economic development.

A Challenging Budgetary Context, a Controversial Response

On July 30th, Senegal’s new authorities, in power since April 2024, adopted a national recovery plan for 2025–2028. Its primary goal: to restore fiscal balance in a country burdened by a 12.3% budget deficit and a public debt approaching 100% of GDP, a legacy of the previous decade.

To achieve this, the government is implementing a series of fiscal and budgetary reforms, including a new tax targeting digital financial services, and more specifically, Mobile Money transactions.

The plan includes the following measures:

•          A 0.5% tax on every money transfer,

•          A 1.5% tax on merchant payments,

•          An additional 2% fee on merchants themselves.

The government aims to raise 220 billion CFA francs over three years, with 130 billion from individual transactions and 90 billion from merchant payments.

Mobile Money: A Pillar of Financial Inclusion

But this decision is drawing significant criticism, because in Senegal, Mobile Money is far more than just a payment tool, it is a vital engine of financial inclusion. With traditional banking access limited to only 26% of the population, mobile wallets have become the primary financial service for over 90% of Senegalese adults over the age of 15.

In 2025 alone, Mobile Money platforms facilitated 15.3 trillion CFA francs in transactions, a clear sign of their systemic importance. From boutiques and markets to restaurants and rural vendors, QR code payments are now ubiquitous, even in the most remote areas.

Introducing a tax on these transactions means directly targeting the general population especially vulnerable groups such as low-income households, women entrepreneurs, students, and informal workers. For many, every franc matters, and raising transaction fees may be enough to discourage continued use of digital services.

A Likely Return to Cash and a Risk of Fiscal Failure

Ironically, this tax could undermine the very goals it seeks to achieve. By making digital transactions more expensive, the reform could drive users back to cash, which makes it less traceable, less secure, and less taxable.

This would not only reduce the overall volume of digital transactions but also weaken economic transparency, further complicating tax collection efforts.

Moreover, the reform could cool investment from fintech companies and telecom operators, who are the driving force behind financial innovation in Senegal. If these actors perceive the fiscal environment as unpredictable or unfair, they may scale back their operations, stalling momentum in the digital economy.

Cautionary Tales from Neighboring Countries

Senegal is not the first African country to consider taxing Mobile Money, and regional experiences offer sobering lessons.

In July 2024, the International Centre for Tax and Development (ICTD) in a study zoomed into the implementation of taxes on mobile money transactions in Africa and came out with certain conclusions.

In Cameroon, a 0.2% tax introduced in 2022 led to widespread backlash and a sharp drop in transaction volume. In July 2018, Uganda introduced a new tax on mobile money transaction values, implementing it hastily without following standard tax policy procedures. Initially, each action — depositing, sending, receiving, and withdrawing was taxed separately, resulting in multiple layers of taxation on a single transaction. This new tax was added to existing mobile money fees that had been in place since 2013. Widespread public backlash and political pressure forced the government to revise the policy in November 2018, reducing the tax rate and limiting it to withdrawals only. Although transaction volumes and values dropped sharply at first, they eventually rebounded.

Early in the Covid-19 pandemic, Rwanda eliminated telecom fees on MoMoPay, a digital merchant payment service. This led to a 20% increase in MoMoPay usage and a similar drop in cash transactions. However, when fees were partially reinstated in September 2021, cash use rose by 10% and digital payments declined by 5%.

In contrast, countries like Kenya and Tanzania have implemented more targeted taxes, usually limited to service fees or applied to operator profits rather than directly taxing users. While these approaches still raise concerns over equity, they have been more broadly accepted and less disruptive.

A Question of Justice and Balance

More than a technical debate, this proposed tax raises fundamental questions about social justice and political coherence. Taxing digital payments disproportionately affects those who rely on them most and risks undermining a decade of progress in financial inclusion.

Mobile Money has enabled millions of Senegalese in both urban and rural areas to access secure, fast, and accessible financial services. It has also boosted commerce, reinforced family networks, and helped modernize the informal economy. Undermining this system would put a vital social and economic infrastructure at risk.

Some experts argue that the government should rethink its fiscal strategy by focusing on combating tax evasion, broadening the tax base through greater formalization of the informal sector, and using Mobile Money transaction data to identify untaxed commercial activity without discouraging usage.

A Reform That Must Be Rethought

At a time when digital transformation is declared a national priority, tax policy should not act as a barrier. The Senegalese government would be well advised to open a transparent and inclusive public debate, involving users, telecom providers, fintech innovators, civil society, and academics, to design a fairer, more progressive, and socially acceptable fiscal approach.

Fiscal success should not be measured solely by short-term revenue gains, but by the government’s ability to preserve the very dynamics that are propelling the country forward.