A Comprehensive Data-Driven Analysis of Tanzania's Fiscal Challenges and Development Financing
Tanzania's economy faces a critical fiscal challenge: while GDP has grown an impressive 78% from TZS 118.7 trillion (2017) to TZS 211.2 trillion (2025), the tax system has failed to capture proportional revenue. The tax-to-GDP ratio remains stubbornly flat at 11.5-12.8%, well below the Sub-Saharan African average of 16.5%.
This comprehensive analysis of eight years of fiscal data (2017-2025) reveals fundamental misalignments between economic growth, budget expansion, and revenue collection. The informal sector—representing 45-46% of GDP and employing 76% of the workforce—escapes taxation almost entirely, creating an annual revenue loss of approximately TZS 8-10 trillion.
The stark conclusion: Without major tax system reforms, Tanzania's Vision 2050 ambitions are unachievable. Current trajectory projects a debt crisis by 2028-2030, with fiscal deficits worsening from 2.6% to 4.0% of GDP despite economic growth.
| Year | Real GDP Growth (%) | Nominal GDP (TZS Trillion) | GDP (USD Billion) | GDP Per Capita (USD) | Inflation Rate (%) |
|---|---|---|---|---|---|
| 2017 | - | 118.7 | ~70 | 1,150 | - |
| 2018 | 7.1 | 124.0 | 72 | 1,165 | 3.5 |
| 2019 | 6.1 | 134.5 | 74 | 1,180 | 3.4 |
| 2020 | 5.0 | 145.4 | 76 | 1,190 | 3.3 |
| 2021 | 4.8 | 156.2 | 77 | 1,200 | 3.7 |
| 2022 | 5.0 | 170.8 | 78 | 1,220 | 4.3 |
| 2023 | 5.2 | 188.8 | 79 | 1,240 | 3.8 |
| 2024 (Est.) | 5.5 | 199.2 | 83 | 1,260 | 3.3 |
| 2025 (Proj.) | 6.0 | 211.2 | 87 | 1,280 | 3.4 |
| Fiscal Year | Total Collection (TZS Trillion) | Growth Rate (%) | Tax-to-GDP Ratio (%) | Target Achievement |
|---|---|---|---|---|
| 2018/19 | ~14.3 | - | 11.5 | - |
| 2019/20 | ~15.5 | 8.4 | 11.5 | - |
| 2020/21 | ~16.7 | 7.7 | 11.5 | - |
| 2021/22 | ~18.0 | 7.8 | 11.5 | - |
| 2022/23 | 19.6 / 24.14* | 8.9 | 11.5-11.7 | Achieved |
| 2023/24 | 21.7 / 27.64* | 10.7 / 14.5* | 11.5-12.1 | Achieved |
| 2024/25 (Target) | 25.5 / 32.27* | - | 12.8 / 12.5* | In Progress |
| 2025/26 (Projected) | ~27.0 | 5.9 | 12.8 | Projected |
*Dual figures reflect different data sources - first from NBS/analytical reports, second from TRA official collections
Despite consistent absolute revenue growth averaging 8-10% annually, the tax-to-GDP ratio remained stubbornly flat at 11.5% for five consecutive years (2018-2022), showing only modest improvement to 12.8% by 2024/25. This is significantly below the Sub-Saharan Africa average of 16.5%, representing approximately TZS 6-8 trillion in foregone annual revenue.
Tax Buoyancy Problem: At 0.88, for every 1% GDP growth, tax revenue grows only 0.88%, indicating structural inefficiency in the tax system.
| Fiscal Year | Total Budget (TZS T) | Budget (USD B) | Growth Rate (%) | Domestic Revenue (TZS T) | Tax Share (TZS T) | Revenue Coverage (%) | Deficit (% GDP) |
|---|---|---|---|---|---|---|---|
| 2020/21 | 34.1 | ~14.2 | - | 22.5 | 16.7 | 66% | 2.6 |
| 2021/22 | 36.6 | ~15.2 | 7.3 | 24.0 | 18.0 | 66% | 3.6 |
| 2022/23 | 41.5 | ~17.3 | 13.4 | 27.0 | 19.6 | 65% | 3.9 |
| 2023/24 | 44.4 | 18.4 | 7.0 | 29.5 | 21.7 | 66% | 3.9 |
| 2024/25 | 54.8 | 21.5 | 23.4 | 34.2 | 24.0-25.5 | 62% | 4.0 |
| 2025/26 (Proj.) | 56.5 | 22.2 | 3.1 | 36.0 | 27.0 | 64% | 4.0 |
Six-Year Trend Analysis (2020/21 to 2025/26):
Critical Issue: Budget growth outpaces revenue growth, creating a structural fiscal deficit requiring increased borrowing (now 30-35% of budget) or donor funding, threatening long-term debt sustainability.
| Financing Source | 2023/24 (TZS T) | 2023/24 Share (%) | 2024/25 (TZS T) | 2024/25 Share (%) | Sustainability Risk |
|---|---|---|---|---|---|
| Tax Revenue | 21.7 | 48.9% | 24.0-25.5 | 43.8-46.5% | Moderate-High |
| Non-Tax Revenue | 7.8 | 17.6% | 8.7-9.7 | 15.9-17.7% | Low-Moderate |
| Total Domestic Revenue | 29.5 | 66.4% | 34.2 | 62.4% | - |
| Foreign Grants | ~1.5 | 3.4% | ~1.0 | 1.8% | High (declining) |
| Concessional Loans | ~5.5 | 12.4% | ~5.6 | 10.2% | Moderate |
| Commercial Borrowing | ~7.9 | 17.8% | ~14.0 | 25.5% | Very High |
| Total External Financing | ~14.9 | 33.6% | ~20.6 | 37.6% | - |
| TOTAL BUDGET | 44.4 | 100% | 54.8 | 100% | - |
Most concerning trend: Commercial borrowing jumped from 17.8% to 25.5% of budget—more than doubling in absolute terms from TZS 7.9T to 14.0T. This carries high interest rates (7-10% vs. 1-3% for concessional loans), significantly increasing debt servicing costs and reducing fiscal space for development.
Key Risks:
| Indicator | Formal Sector | Informal Sector | Impact on Revenue |
|---|---|---|---|
| Share of GDP | 54-55% | 45-46% | Massive revenue loss |
| Share of Employment | 24% | 76% | Narrow tax base |
| Tax Compliance Rate | Moderate-High | Very Low | Low collections |
| Economic Visibility | Tracked | Largely untracked | Planning challenges |
| Business Registration Rate | Low (0.2 per 1000 pop.) | Unregistered | Enforcement difficulty |
Using Conservative Estimates:
What this lost revenue could fund:
| Country | Tax-to-GDP Ratio (%) | GDP Per Capita (USD) | Informal Sector (% GDP) | Revenue Performance |
|---|---|---|---|---|
| Tanzania | 11.7-12.8 | 1,200 | 45-46 | Below potential |
| Kenya | 13.7-18.0 | 2,100 | ~35 | Good |
| Rwanda | 15.0-16.3 | 966 | ~40 | Excellent |
| Uganda | 12.1-15.1 | 1,046 | ~43 | Moderate |
| Burundi | 15.2-18.0 | 238 | ~38 | Good |
| EAC Average | 12.74 | - | - | - |
| LMIC Average | 14.51 | - | - | - |
| SSA Average | 16.5 | - | - | - |
Tanzania collects 4-5 percentage points less than the Sub-Saharan Africa average. At current GDP levels (TZS 199.2 trillion in 2024), this represents approximately TZS 6-8 trillion in foregone annual revenue.
Even Rwanda, with lower GDP per capita (USD 966 vs Tanzania's USD 1,200), achieves a significantly higher tax-to-GDP ratio (15-16.3%), demonstrating that effective tax administration and formalization can overcome structural constraints.
| Indicator | Current (2024) | Vision 2050 Target | Required Annual Growth | Gap Analysis |
|---|---|---|---|---|
| GDP (USD) | 85 billion | 1 trillion | 10% | Current: 5.5% (Shortfall: 4.5%) |
| Tax Revenue (USD) | 10 billion | 140 billion | ~11% | Current: ~8% (Shortfall: 3%) |
| Active Taxpayers | 2.82 million | 20+ million | 8% annually | Currently: Declining |
| Informal Sector Share | 46% | <25% | -1pp/year | Currently: Stable |
| Year | Projected GDP (USD B) | Tax Revenue at 13% (USD B) | Required Revenue (USD B) | Annual Gap (USD B) |
|---|---|---|---|---|
| 2025 | 90 | 11.7 | 13.5 | 1.8 |
| 2030 | 130 | 16.9 | 26.0 | 9.1 |
| 2035 | 200 | 26.0 | 50.0 | 24.0 |
| 2040 | 350 | 45.5 | 87.5 | 42.0 |
| 2050 | 650 | 84.5 | 140.0 | 55.5 |
Without major reforms, Tanzania will collect only 60% of required revenue by 2050.
To achieve Vision 2050 goals, annual tax revenue must increase from current USD 10 billion to USD 140 billion (approximately TZS 350 trillion), requiring GDP growth to double from 5.1% to at least 10% annually—a feat that demands comprehensive structural transformation.
| Reform Initiative | 2025 Impact (TZS T) | 2027 Impact (TZS T) | 2030 Impact (TZS T) | Cumulative 6-Year (TZS T) | Priority Level |
|---|---|---|---|---|---|
| Informal Sector Formalization | +1.0 | +2.5 | +3.8 | 12.3 | CRITICAL |
| Tax Base Expansion | +1.5 | +3.2 | +4.2 | 15.8 | CRITICAL |
| Tax Administration (TRA) | +2.0 | +4.0 | +4.7 | 19.2 | HIGH |
| Tax Buoyancy Improvement | +1.5 | +2.8 | +3.5 | 13.1 | CRITICAL |
| Sectoral Taxation | +1.0 | +3.5 | +5.5 | 16.4 | HIGH |
| Budget Efficiency Gains | +1.5 | +3.0 | +4.0 | 14.7 | HIGH |
| TOTAL POTENTIAL | +8.5 | +19.0 | +25.7 | +91.5 | - |
Target: Reduce informal sector from 71.8% of workforce (40-46% GDP) to 50% workforce (30% GDP) by 2030
Potential Revenue Impact: +TZS 3.8 trillion annually by 2030 | Cumulative six-year gain: ~TZS 12.3 trillion
Recommended Actions:
Target: Increase registered taxpayers from 2.82M to 8M by 2030; improve tax buoyancy from 0.88 to 1.05
Potential Revenue Impact: +TZS 4.2 trillion from new taxpayers + TZS 3.5T from buoyancy improvement = TZS 7.7T annually
Current Coverage Analysis:
Actions: Automated tax filing (e-TRA expansion), risk-based auditing, third-party data matching (banks, telcos, property registries), employer withholding enforcement for gig economy, property tax modernization
Pathway to 18% by 2030: From current 12.8% to 13.5% (2025) → 14.5% (2026) → 15.5% (2027) → 16.5% (2028) → 17.0% (2029) → 18.0% (2030)
Cumulative Additional Revenue (2025-2030): TZS 38.2 trillion
Benchmark: 18% target is ambitious but achievable with comprehensive reforms, aligning with Rwanda (15-16.3%) and approaching SSA average (16.5%)
Total Impact: +TZS 4.7T annually by 2027
Initiatives:
Agriculture Sector (26-28% GDP, ~8% tax contribution):
Digital Economy (emerging, <1% tax contribution):
Real Estate/Property (5-7% GDP, ~3% tax contribution):
Tanzania's economic growth (78% in 8 years), budget expansion (66% in 6 years), and tax collection (62% in 8 years from very low base) are fundamentally misaligned because:
Not incremental adjustments, but fundamental restructuring:
The data is unambiguous: Without comprehensive reform starting immediately, Tanzania will face a fiscal crisis by 2028-2030. With reform, Vision 2050 remains within reach. The choice is clear. The time is now. The data has spoken.