Call for research proposals on digital financial services, digital ID, and taxation

Date:
News

Background

The rapid expansion of mobile money and broader digital financial services (DFS) as well as the increased relevance of digital IDs across Africa and other low-income countries over the past decade gives rise to two new important challenges for tax systems.

First, resource-constrained governments may see the expansion of DFS as an opportunity to tax these new services. The extent and form of that taxation is likely to have important implications for the adoption of these new technologies by individuals, for the development of DFS markets, and for the broader goal of financial inclusion.

Second, the expansion of DFS and digital IDs has the potential to provide governments with access to extensive new data with which to improve tax administration. However, considerable hurdles remain in the administrative and technological capacity of revenue authorities in attempting to fulfil this potential.

The DigiTax research programme

Despite these significant challenges and opportunities, very little rigorous research has been conducted in this area so far. The ICTD’s new DigiTax research programme aims to generate knowledge and evidence in order to support governments in (i) designing appropriate and effective taxation of DFS and DFS providers, and (ii) harnessing the potential for DFS and digital IDs to strengthen tax administration.

We particularly encourage research in two specific areas:

(1) The taxation of digital financial services
Rigorous research is needed to understand how governments can design appropriate taxation of mobile money, money transfers and other DFS (such as insurance, savings and pension products), striking a balance between the goals of revenue collection, long-term market development, and equity for taxpayers. We welcome proposals addressing the following questions:

  • Rationales: What are the rationales for specific taxes on mobile money and money transfers in the context of broader taxation of mobile network operators and taxes that exist for other providers of financial services?
  • Processes: What processes have been followed in different countries in developing mobile money taxes and how could those processes be enhanced to arrive at better outcomes?
  • Impacts on users: What is the impact of mobile money taxation on different groups of users and types of activities?
  • Impacts on market development: How might taxation influence broader market development (and competition) in the medium term?

(2) Leveraging DFS and digital IDs for improved tax collection
Research is also needed on the potential of DFS (i.e. merchant payments, E-commerce, tax payment digitalisation, etc.) and digital IDs in improving the way in which tax administrations operate by expanding access to new data and streamlining internal processes

  • Impact on tax administrations: How can the expansion of DFS and digital IDs contribute to improvements in taxation, reflected in increased revenue collection, administrative streamlining and/or advancing equity?
  • Administrative barriers: How is new technology being adopted by tax administrations, and to what extent are they able to make use of data from DFS and digital IDs effectively?
  • Demand-side adoption barriers: To what extent are DFS being adopted by users and what are the barriers to adoption?
  • Tax policy: What is the role of DFS in improving the level of transparency and accountability within institutions and how do they fit within the broader context of policy reforms in public institutions?
    Submit a proposal

Submit a proposal

We are interested in proposals for research in lower-income countries across Africa and Asia. Research from middle-income countries may also be considered if it focuses on particularly innovative policies or technologies from which low-income countries can learn useful lessons. We particularly value proposals from low-income country researchers or teams that include joint efforts between Northern and Southern researchers.

We will prioritise proposals submitted before April 18th, as we aim to fund research that can be completed in 2021. At the same time, we are open to longer-term projects that span up to two years maximum. Research grants can be small or large based on the scale of the project and the research methodology proposed, but proposals must be clear about the specific research questions to be answered and the objectives and scope of the project. Research grants can cover researcher fees as well as costs directly related to the research.

Please submit your initial brief proposal via this form.

Please send any queries relating to this call to the DigiTax Programme Lead Laura Munoz at laura.munoz@ictd.ac.

Image credit: © Fiona Graham/WorldRemit