Digital Financial Inclusion, Digital Financial Services Tax and Financial Inclusion in the Fourth Industrial Revolution Era in Africa

Abstract

The digital economy has risen dramatically in the global environment, and many developing countries, including African countries, have seen a spike in digital activity over recent years. The digital economy’s growth has resulted in an increase in digital financial services (DFS) in Africa and other developing regions. Since many African countries are under pressure to raise domestic revenue, taxing the digital economy has become a viable option. As a result, this study attempted to respond to the following questions: first, what is the link between DFS growth and digital inclusion in African countries? Second, what justifies the imposition of DFS taxes in Africa? Third, what are the potential consequences of DFS taxes in African countries? Using secondary data from the literature review and document analysis, a systematic technique for assessing or evaluating printed and electronic documents, and computer-based and internet-transmitted material, the study discovered that digital financial inclusion is driving financial inclusion on the African continent. The study also found that, despite several negative consequences associated with the growth of the digital economy, most African economic activities are informal and are being aided by various digital financial services. Therefore, it is equally crucial that when adopting digital finance taxes, care is taken to avoid excluding low-income earners from the financial sector and to take note of the usage, affordability, and distortive implications of taxation.

Does Enterprise Digital Transformation Reduce Tax Compliance?

“…On the one hand, digital transactions with the development of science and technology often have a certain virtuality, and the asymmetry of enterprise transaction information will enhance the tax avoidance motive of enterprises, and then have a negative impact on tax compliance. On the other hand, tax authorities will also use digital technology to improve the e ciency of tax administration and the accuracy of tax inspection, and the transparent transmission of tax-related information of enterprises, thus improving the tax compliance of enterprises (Mpofu, 2023).…”

Unveiling the drivers of Africa's digital financial inclusion journey

“…In the African context, numerous studies have emphasized the crucial role of digital financial inclusion in promoting financial access, enhancing individuals’ capabilities, empowering them, and reducing both poverty and inequality (Al‐Smadi, 2023; Elouaourti & Ezzahid, 2022; Ezzahid & Elouaourti, 2021a; Mpofu & Mhlanga, 2022; Tinta et al, 2022). A review of the literature has revealed two primary categories of inquiry.…”

Industry 4.0 in Finance, Digital Financial Services and Digital Financial Inclusion in Developing Countries: Opportunities, Challenges, and Possible Policy Responses

“…In Rwanda, the government has partnered with a mobile money company to provide financial services to farmers. This has helped farmers to access credit and markets, which has increased agricultural production and economic growth (Mpofu and Mhlanga, 2022). In Tanzania, a microfinance institution has used DFS to provide loans to women entrepreneurs.…”