CARE Seminar: Youssef Benzarti, University of California, Santa Barbara

Speaker

Youssef Benzarti, University of California, Santa Barbara

Title

"Mobile Money Taxation: Evidence from Tanzania"

Abstract

Mobile money represents one of the most transformative advances in communication and financial technology of the current millennium, enabling money transfers through simple mobile text messages. Its diffusion has been particularly impactful in African countries, where access to traditional banking services remains limited. Using billions of mobile money transactions from Tanzania—one of the largest mobile money markets—we document usage patterns across several dimensions, including time of day, day of the week, user loyalty, and gender differences. We further provide novel evidence on behavioral responses to the introduction and subsequent reduction of a levy on mobile money transactions. The asymmetric response we document—characterized by large adjustments along both the extensive and intensive margins following the tax increase, and comparatively muted responses to the subsequent tax decrease—raises concerns about the efficiency costs of this tax. In particular, the common presumption among policymakers that it is possible to overshoot tax rates and later reverse course without lasting effects may not hold, potentially resulting in persistently suboptimal allocations.