This study aims to examine the impact of taxation on the adoption of digital finance in Africa and to assess the extent to which governance quality moderates this relationship. Using panel data for 54 African countries over the period 2007–2023 and applying the two-step System GMM, we find that taxes on goods and services—especially excise duties—exert a positive and statistically significant effect on the share of the population adopting mobile money. More importantly, this positive effect is strongly amplified in countries with better governance quality. Interaction terms reveal that government effectiveness, control of corruption, and voice and accountability significantly moderate the tax-adoption nexus, making taxation more conducive to digital finance development in countries with stronger institutions. These results remain robust across alternative tax measures, sample restrictions, lag structures, and additional controls. By distinguishing between general tax capacity and sector-specific taxes on digital financial services, this study reconciles contrasting findings in the literature and highlights a complementary relationship between fiscal policy and institutional quality. The findings suggest that strengthening governance represents a more effective strategy for simultaneously expanding the tax base and promoting digital financial inclusion in Africa.
Babacar NDIAYE (Mon,) studied this question.