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.