- Mobile money is the backbone of Senegal’s economy, with over 90% of adults relying on digital wallets, so a 0.5% tax on transfers could disrupt national economic activity.
- The levy risks being regressive, hitting low-income users hardest through multiple taxation and pushing people back to cash, which undermines financial inclusion and transparency.
- Experts warn the tax could reduce transaction volumes, harm youth employment and public revenue, and propose alternatives like taxing operator revenues or focusing on high-value sectors instead.
Senegal’s plan to introduce a 0.5% tax on mobile money transfers has become one of the most contentious economic debates in the country, with financial analysts, civil society groups and digital finance practitioners warning that the policy may trigger negative consequences for financial inclusion, youth employment and public revenue.
The government says the reform is designed to strengthen public finances.
However, insights from multi-stakeholder consultations show a unanimous fear: the tax could do the opposite by shrinking digital usage, pushing citizens back to cash and undermining revenue growth.
Over 90% of Adults Depend on Digital Wallets
Mobile money is Senegal’s dominant financial infrastructure. More than nine out of every ten adults rely on digital wallets for everyday transactions ranging from food purchases and school payments to remittances, micro-business operations and public services.
The system processes trillions of CFA francs annually, making it crucial to household survival and business operations. Analysts warn that any increase in the cost of transactions immediately disrupts economic activity on a national scale.
Multiple Taxation Risk Could Hit Low-Income Users Hard
Under the proposed measure, the 0.5% levy applies to transfers used most frequently by ordinary citizens. Because digital funds typically circulate through repeated small payments, the same money could be taxed multiple times, disproportionately affecting:
- Students and low-income households
- Women traders in markets
- Informal sector workers
- Small merchants and mobile money agents
Economists describe the structure as regressive, noting that the poor will bear more weight than high-income users who can avoid frequent digital transfers.
Threat to Financial Inclusion and Public Transparency
Stakeholders warn that higher transaction costs will push users back to cash—the cheapest alternative. This development could unravel years of progress in financial inclusion and reduce financial transparency, a key driver of Senegal’s drive toward digitised governance.
A return to cash, they argue, will weaken efforts to modernise public services such as electricity, water, public transport, education, hospital payments and identity systems, which rely heavily on digital channels for accountability.
Youth Employment and Merchant Payments at Risk
The digital finance boom has created employment for thousands of young agents whose income depends on transaction volumes. If usage drops, many of these agents risk losing their livelihoods. Small merchants who depend on digital payments for security and efficiency will also face disruptions.
“The ecosystem is interconnected. Once usage drops, everyone in the value chain feels it,” one industry expert noted during consultative dialogues.
Remittances Could Be Unintentionally Affected
Although international remittances may not be directly taxed, the domestic transfers made from those funds will incur the levy, creating friction in a revenue stream that supports millions of households and contributes to foreign exchange stability.
Fiscal Contradiction: Taxing Digital Reduces Government Revenue
Economists warn that the policy contradicts Senegal’s long-term fiscal interests. Digital transactions expand the tax net by creating traceable economic activity, while cash makes revenue harder to monitor.
By discouraging digital use, the proposed levy could lead to lower transaction volumes and reduced revenue collection, a trend observed in several African countries that later cancelled or modified similar taxes due to poor results.
Experts Propose Alternative Revenue Models
Stakeholders have recommended alternative strategies to generate revenue without penalising users, including:
✔ Taxing the revenues of mobile money operators instead of user transactions
✔ Accelerating digital tax payment systems to boost compliance
✔ Targeting high-value under-monitored sectors
✔ Expanding digitalisation in education, health, agriculture and local governance
If government insists on the tax, analysts recommend that it apply only to cash withdrawals, not transfers, to protect the circulation of digital money and prevent multiple taxation.
A Decisive Moment for Senegal’s Digital Future
The final direction of the reform is set to determine the trajectory of Senegal’s digital economy. The country faces two choices: pursue an aggressive tax that risks reversing financial inclusion gains, or adopt a sustainable approach that strengthens public finances without harming citizens.
The outcome, experts warn, will influence not only revenue collection, but also youth employment, digital trust, household stability and the long-term modernization of public services.
