Last week we reported that Argentina might launch a central bank digital currency (CBDC) project based on the promises of the leading Argentinian presidential candidate. Cash is widely used in Argentina and the country has a substantial informal sector. A director at the Central Bank of Argentina expressed a desire for a CBDC to help financial inclusion and digitalize the economy. The result would be an expansion of the tax base. However, in Africa tax moves have partially offset the gains in financial inclusion.
Mobile money has been a huge success in Africa, particularly in Kenya. In 2006, the year before the famous M-Pesa app launched, Kenya’s financial inclusion stood at 26%. By 2022 it was 83%.
Times change, and so do governments. Following Kenya’s elections last year, in January the new administration saw M-Pesa as a useful way to identify people that should be paying taxes. As a result, local news outlets reported that a substantial number of small businesses stopped using mobile payments and returned to cash. Last month the tax service deployed 1,400 new staff to enroll more taxpayers. Reportedly it targeted businesses that recently stopped using M-Pesa.
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