Tax Revenue in Emerging Markets and Developing Countries: Does Digital Finance Matter?

Abstract

This paper investigates whether adopting mobile money services influences non resource tax revenues in emerging markets and developing countries. Using a sample of 97 countries over the period 1990–2021, our empirical analyses, based on instrumental variables, system-GMM, and endogenous switching regression methods, suggest that digital finance leads to more tax revenue. We also find that bill payments, merchant payments, person-to-person payments, and person-to government payments have a greater impact on tax revenues than other mobile money services. The potential positive impact mechanisms are the decline of the informal sector, the reduction of corruption, and the facilitation of international remittance inflows.