Working Paper 178

Making tax administration more efficient and maximising voluntary compliance is a very difficult task for developing countries. In this paper, we analyse the effect of mobile money payments on the quality of tax policy and administration for a large sample of countries in developing economies. We use the World Bank indicator on efficiency of revenue mobilisation as a measure of the quality of tax policy and administration and employ an entropy balancing method to show that mobile money payments improve the quality of tax systems. This result is robust to several robustness tests, including sample alteration, alternative measures of mobile money, controlling for other aspects of tax policy, and alternative estimation methods such as GMM-system, event study approach and ordinary least square. In addition, our results show that the positive effect of mobile money on tax systems depends on the level of development, financial development, the state’s legitimacy, a country’s fiscal space, the number of available products/companies, the type of mobile money services, and the geographic position of countries. Finally, we highlight some potential mechanisms underlying these findings through lower tax compliance burden, smaller informal sector, and lower corruption.

Authors

Ablam Estel Apeti

Ablam Estel Apeti is a postdoctoral fellow at the University of Göttingen and a researcher at the Laboratoire d'Economie d'Orléans, Université Clermont Auvergne (LEO–UCA). His research covers a wide field, from development economics to macroeconomics and political economy.

Eyah Denise Edoh

Eyah Denise Edoh is a PhD candidate in economics at the Université Clermont Auvergne, Laboratoire d'Economie d'Orléans (LEO–UCA). Her research covers a wide range of topics in development economics, including digitisation, public finance and climate change.
Download