In recent months, we have been hearing a lot about P2G (people to government) and B2G (business to government) payments from mobile money providers interested in moving into this space. P2G and B2G payments – such as collecting income, sales and value-added tax payments, social security and pension contributions, automotive costs (including tolls, and fines), and company registration fees – represent an interesting opportunity to process large and regular volumes of transactions. Indeed, government payments usually represent between 15% and 45% of a country’s GDP according to the World Bank.

This is quite a new area of development for mobile money and few best practices exist. However, we thought it would be useful to share an overview of the P2G and B2G initiatives that have already been implemented.

P2G and B2G landscape

Currently a handful of countries enable citizens to use mobile money to pay their taxes to the Revenue Authorities, includingKenya, Mauritius, Rwanda, Tanzania, and Uganda. In the Philippines, small enterprises can declare income returns, pay their taxes and business registration fees via mobile money. In addition, residents of Quezon City can also pay their Real Property Tax via GCash.

What are the benefits of using mobile money for P2G and B2G? 

Using mobile money instead of cash for P2G and B2G has the potential to reduce fraud and increase transparency and revenues for tax authorities. The ability for an official to demand a payment and to dictate that such a transaction take place in cash opens a space for corruption and decreases the likelihood of the official being identified or prosecuted.

On the other hand, in countries where mobile penetration is high, mobile money enables tax authorities to reach a large number of citizens and businesses and can reduce tax avoidance. For citizens and businesses, mobile money offers a convenient and simplified way of paying taxes by reducing the administrative burden and by allowing remote payments. For mobile money providers, equipping customers with the ability to make P2G and B2G transactions via platforms will further expand the digital financial ecosystem, and potentially offer revenue growth.

Early evidence suggests that using mobile money for tax payments can help reduce tax avoidance

• The example of Tanzania: Three years after the launch of the first mobile money service in Tanzania, the Tanzania Revenue Authority enabled tax payments over mobile money for property taxes and personal income taxes. One year later, around 15% of the tax base was using mobile money. In a study conducted by STATT, it was found that there was a correlation between the adoption of mobile money for tax payments and a decrease in tax avoidance, and that some of those now using the mobile payments option do not have a history of paying taxes.

• The example of Mauritius: In March 2014, Mauritius Telecom partnered with the Mauritius Revenue Authority and the State Bank of Mauritius to enable income tax payments via mobile for Orange Money customers. In addition to offering payments via SMS, for the E-Filing season 2014, the Mauritius Revenue Authority reported more than 123 000 returns were received electronically (using mobile devices or online), representing a 12% increase as compared to 2013 filing season.

• The example of Kenya: More recently, a new partnership between Airtel and the Kenya Revenue Authority (KRA) allows Airtel Money customers to pay their taxes via the mobile money platform – a flexible and time saving option as customers will no longer have to queue in KRA banking halls to pay their taxes. Previously in 2012, the KRA offered Kenyans the ability to renew their driving licenses using mobile money, and at the time KRA Commissioner General John Njiraini explained that “easing tax compliance leads to enhanced collection as tax payers find it easier to comply.”

Do you know of any other examples of P2G or B2G payments? Share your thoughts below in our comments section, or by emailing [email protected].