Full Breakdown
Africa’s Digital Tax Drive: Balancing Revenue and the Informal Economy
5/27/2026, 8:24:28 PM
Governments Expand Digital Tax Collection in the Informal Sector
Governments from Nigeria, Kenya and Senegal are intensifying efforts to broaden domestic tax bases, focusing on the informal economy. Kenya’s plan to tax digital payments and mobile-money services, including M-Pesa, illustrates a shift toward using digital platforms to capture revenue that previously escaped oversight.
Background & Context: Informality as a Structural Feature
In sub-Saharan Africa, informal employment accounts for nearly 90 % of jobs, making the informal sector the dominant source of livelihoods. Simultaneously, African nations record some of the world’s lowest tax-to-GDP ratios—about half the OECD average of 30 %, implying a rate near 15 %. Rising debt burdens and tighter global financing conditions have heightened pressure on governments to find new revenue streams.
Key Figures & Groups
- Brookings Institution – the think-tank that authored the recent paper on digital tax collection.
- Pierre Nguimkeu – senior fellow at Brookings, author of the paper’s analysis.
- Kenyan Ministry of Finance – advancing the digital-payment tax proposal.
- M-Pesa (Safaricom) – the leading mobile-money platform targeted by the tax plan.
- Governments of Nigeria and Senegal – also pursuing digital tax reforms.
Data & Statistics
Official Statements & Responses
The Brookings paper argues that many policymakers treat informality as a compliance failure, assuming untaxed activity can be captured through registration, digitization, and enforcement. It contends that informality often reflects rational adaptation to weak public services, scarce formal jobs, limited finance, and low state capacity. Kenyan officials describe the digital-payment tax as a means to improve fiscal sustainability while leveraging the country’s high mobile-money penetration.
Criticism & Opposition
Critics warn that taxing digital payments could deter the adoption of mobile-money services, pushing transactions back to cash and undermining financial inclusion. They also caution that increased tax visibility may lead to heavier levies without corresponding improvements in public services, especially in rural areas where infrastructure remains limited.
Conflicting Views on Informality
Policymakers’ view of informality as a “compliance gap” conflicts with the Brookings analysis that frames it as a strategic response to state weakness. This divergence shapes how reforms are designed and evaluated.
Why It Matters
Enhanced tax collection could provide governments with resources needed for infrastructure, healthcare, and other public services. However, if digital tax measures reduce financial inclusion or exacerbate the urban-rural divide, they may undermine the very economic resilience they aim to strengthen.
What’s Next
Kenya’s proposals would increase taxes tied to digital payments and mobile-money services, while Nigeria and Senegal are also exploring similar digital-tax reforms. The ongoing debate reflects the tension between expanding revenue bases and preserving financial inclusion.
Verbatim Quotes
> “The demands for compliance are made long before any value is delivered,” — Pierre Nguimkeu, Brookings Institution
