Introduction

Tax reforms and policy planning play a critical role in shaping Tanzania’s economic landscape. In the 2023/2024 fiscal year, Tanzania recorded TZS 27.64 trillion in tax revenue, marking a 14.47% growth compared to the previous year. However, the tax revenue target of TZS 28.3 trillion was not fully met, signaling a need for enhanced efficiency and compliance strategies. Key contributing sectors included services (28.2%), trade (23.6%), and manufacturing (17.7%).

Despite this growth, businesses in Tanzania continue to face challenges such as high compliance costs, averaging 2% of annual revenues, which disproportionately impact SMEs and sustain a large informal economy (60% of employment). Addressing these barriers through policy reforms can lead to a more sustainable and inclusive economy.

Tax Revenue Growth and Sector Contributions

Tanzania’s tax revenue has been on an upward trajectory, driven by improvements in collection mechanisms.

Key Figures (2023/2024):

• Total Tax Revenue: TZS 27.64 trillion (+14.47% from 2022)
• Major Contributing Sectors:
  • Services (including tourism): TZS 7.8 trillion (28.2%)
  • Trade: TZS 6.54 trillion (23.6%)
  • Manufacturing: TZS 4.9 trillion (17.7%)
  • Agriculture: TZS 1.55 trillion (5.6%)

Challenges:

• Compliance Costs: Businesses spend 2% of annual revenue on tax compliance.
• Ease of Doing Business Score: Tanzania scored 59/100 in 2022, indicating moderate regulatory barriers.
• Corporate Tax Rate: At 30%, it is higher than Kenya’s (25%) and Uganda’s (30%), potentially deterring investment.

Investment Climate and Policy Impacts

Tanzania’s Foreign Direct Investment (FDI) inflows in 2024 stood at USD 1.5 billion, mainly concentrated in agriculture, mining, and energy. Projections indicate a 10% annual growth in FDI, contingent on regulatory improvements.

Key Policy Recommendations:

• Regulatory Simplification: Reduce bureaucratic hurdles for tax compliance.
• Tax Incentives for SMEs: Lower compliance costs and introduce tax breaks for small businesses.
• Enhancing Transparency: Improve predictability in tax regulations to attract investors.
• Integration of Informal Economy: Develop incentives to transition informal businesses into the formal sector.

Future Outlook and Conclusion

By 2030, Tanzania’s economy could see a significant boost with improved tax policies. Projections suggest:

• Tax revenue could reach TZS 40 trillion if compliance and collection efficiency improve.
• FDI inflows could grow to USD 2.8 billion, strengthening investment in key sectors.
• Financial Inclusion: Reducing compliance burdens and simplifying tax procedures will enhance economic participation.

Final Thoughts

While Tanzania has made remarkable strides in tax reforms, further enhancements in policy planning, compliance simplification, and investment-friendly tax structures will be essential to achieving long-term economic sustainability. Strengthening digital tax infrastructure, increasing taxpayer education, and promoting fair business policies can foster a more inclusive and prosperous economy.

Tax policies significantly influence Tanzania’s investment climate, affecting both local and foreign investors. While taxation is crucial for government revenue, an overly complex and high tax regime can discourage investments, limit capital inflows, and slow economic growth. This article explores how tax laws shape investment trends in Tanzania, presenting key figures, challenges, and potential solutions.

Tanzania’s Tax System and Investment Trends

1. Corporate Tax Rates and Regional Comparison

Tanzania imposes a 30% corporate tax rate on resident companies, one of the highest in East Africa. In contrast:

• Kenya: 25%
• Rwanda: 28%
• Ethiopia: 25%

The high tax rate discourages investments, as seen in 2022 when Tanzania attracted only $922 million in Foreign Direct Investment (FDI), compared to Kenya’s $2 billion and Ethiopia’s $3.1 billion.

2. Tax Compliance and Bureaucracy

Tanzania ranks 163rd out of 190 countries in the World Bank’s Ease of Doing Business Index (2020), reflecting long tax compliance procedures. Businesses spend an average of 240 hours per year filing tax documents, compared to 150 hours in Rwanda.

A survey conducted by TICGL in 2025 revealed:

• 72% of investors found Tanzania’s tax system too complex.
• 63% reported high corporate taxes as a barrier to business expansion.
• 55% believed frequent tax policy changes discouraged long-term investments.

3. Multiple Taxation and VAT Burden

Investors in Tanzania face multiple layers of taxation, including:

• Corporate tax (30%)
• Withholding tax (10-15%)
• Skills and Development Levy (4%)
• Value-Added Tax (VAT) (18%)

Tanzania’s VAT refund delays are a significant issue, with pending refunds amounting to TSh 1.4–1.5 trillion ($650 million) in 2025. Some businesses wait over 12 months for VAT refunds, severely affecting cash flow and expansion plans.

4. Case Studies: How Taxes Affect Investors

Mining Industry: Acacia Mining’s $190 Billion Tax Dispute

• In 2017, Tanzania’s Revenue Authority (TRA) imposed a $190 billion tax bill on Acacia Mining.
• The dispute lasted two years, causing a 70% stock price drop and a 30% decline in FDI in the mining sector.

Telecommunications: Vodacom Tanzania’s $2.5 Million Tax Case

• Vodacom was issued a TSh 5.8 billion ($2.5 million) tax bill in 2021, disrupting its planned 5G expansion.

Tourism Sector: Serena Hotels’ VAT Refund Issues

• Serena Hotels in Tanzania faced a two-year delay on VAT refunds worth TSh 2.1 billion ($900,000), leading to cash flow problems.

Recommendations for a Better Investment Climate

1. Lower Corporate Tax to 25%
   • Aligning with Kenya and Ethiopia could increase Tanzania’s FDI inflows.
2. Simplify Tax Compliance
   • Introduce a one-stop tax portal to reduce paperwork and compliance time.
3. Reduce VAT to 16%
   • This would enhance competitiveness and reduce operational costs for businesses.
4. Automate VAT Refund Processing
   • Ensuring refunds are processed within 30 days would improve business cash flow.
5. Introduce a 5-Year Tax Stability Framework
   • This would provide predictability and confidence for long-term investors.

Conclusion

Tanzania's current tax policies present significant barriers to investment. High corporate taxes, multiple taxation, VAT refund delays, and unpredictable policy changes discourage both local and foreign investors. If key reforms are implemented—such as lowering tax rates, simplifying compliance, and improving tax administration—Tanzania could increase FDI by 10-15% over the next five years, boosting economic growth and job creation.