A tax on daily life

By significantly increasing the cost of mobile money services, this measure will primarily penalise end users. For households, it will mean an increase in fees ranging from x2 to x5 for money transfers and from x2 to x10 for merchant payments. These additional charges, coupled with an increased risk of inflation, will directly impact the purchasing power of the most vulnerable households.

Moreover, this measure will also directly affect the 164,000 distribution agents (cash points). A reduction in mobile money usage will limit their income, thus threatening the economic stability of all these families (approximately 1 million people).

A return to cash? Serious consequences for the economy and society

The effects of this tax will go far beyond consumers. By encouraging a return to cash, this tax will:

    Hamper the digitalisation of Madagascar's economy, reversing a decade's worth of progress by discouraging the use of mobile money services.
    Amplify the informal economy, reducing transaction traceability and complicating tax collection efforts for the state.
    Increase security risks due to the heightened handling of physical cash.
    Decrease foreign exchange inflows, which are crucial for the country's macroeconomic stability.
    Discourage local and international investments, sending a negative signal to entrepreneurs, small and medium-sized enterprises, and investors.
    Undermine the financial inclusion efforts promoted by the Banky Foiben'i Madagasikara, as well as the economic digitalisation initiatives supported by the government itself. Consistency is key.

A lure for public finances

Far from delivering the expected fiscal revenues, this measure is counterproductive. Similar experiments with such a tax in other African countries (e.g., Tanzania, Ghana, Cameroon, Central African Republic) have shown that this type of tax leads to an immediate and sustained decline in the number of active mobile money users (-30%) and in transaction value (an estimated -60% decline within six months). Consequently, the revenues generated from this tax in Madagascar are likely to fall far short of projections, not exceeding 50 billion Ar annually (significantly less than the anticipated 143 billion Ar).

At the same time, the direct fiscal losses caused by reduced activity among Electronic Money Institutions, coupled with delayed digitalisation and formalisation of merchant payments, will surpass this amount (ranging from 60 to 100 billion Ar in lost revenues), resulting in a net fiscal loss for the state. Thus, the effect of this measure will be the opposite of what is intended.

A better alternative exists...

We understand the necessity of finding solutions to increase fiscal revenues, but taxing mobile money transactions is not the right answer. The real solution lies in supporting the mobile money sector to accelerate its widespread adoption.

By 2025, the unrestricted development of mobile money is expected to generate an additional 50 billion Ar in fiscal revenues, through direct taxation of institutions and the ordinary taxation of newly formalised merchant activities. Actively supporting the sector, coupled with mandating the digitalisation of payments for various state services, could significantly accelerate this process. Digitalisation will contribute to the formalisation of the economy and generate increased tax revenues, estimated at 100 billion Ar, through a rise in total transaction volumes and a doubling of the value of merchant payments driven by the informal sector.

We will continue to defend consumers

On a procedural level, this proposed taxation also raises concerns due to the complete lack of consultation with affected stakeholders, despite the significant disruption it poses to a sector vital to millions of Malagasy. This absence of dialogue is, in itself, a troubling sign.

As key players in financial inclusion and economic development in Madagascar, we call on the General Directorate of Taxes to reconsider this measure and prioritise constructive dialogue with all stakeholders to build a fair and sustainable tax framework. Mobile money operators are, and will remain, committed to defending the interests of the millions of Malagasy who trust our services every day...

MVola, Orange Money, Airtel Money