Tax Salience. Experimental Evidence from Tanzania.

In sub-Saharan Africa, the adoption of mobile money has grown substantially during the past decade, becoming an important driver of financial inclusion in the region. At the same time, many governments have introduced taxes on mobile money transfers, which may discourage use and encourage a return to cash-based transactions. In several countries, these taxes have been highly salient to taxpayers following public debate and subsequent rate reductions. This paper examines the effect of tax salience on the use of mobile money. 

Drawing on a lab experiment with small business owners in Dar es Salaam, Tanzania, we randomly vary whether participants are reminded of an existing mobile money tax when making incentivized choices between receiving payments in cash or via mobile money. We find that increasing the salience of the tax significantly reduces the share of participants choosing mobile money. Evidence from a post-experiment questionnaire indicates that participants were well informed about the tax, suggesting that the effect does not operate through lack of knowledge.