A comprehensive, data-driven analysis of Tanzania's fiscal architecture — incorporating the January 2026 TICGL/REPOA corrections and the latest macroeconomic data covering 2004/05 to 2025/26.
Decentralisation of the economy in Tanzania refers to the systematic devolution of fiscal, administrative, and political powers from the central government to Local Government Authorities (LGAs). Formally known as Decentralisation by Devolution (D-by-D), this policy framework is designed to bring government services closer to citizens, foster regional economic development, and reduce the structural dominance of Dar es Salaam as Tanzania's singular economic hub.
Tanzania mainland has 185 LGAs supervised by the President's Office — Regional Administration and Local Government (PO-RALG/TAMISEMI). A landmark January 2026 study by the Tanzania Investment and Consultant Group Ltd. (TICGL), jointly disseminated with researchers at REPOA (Research on Poverty Alleviation), provides the most up-to-date and precise quantification of the geographic concentration of Tanzania's tax economy — and reveals a structural paradox that defines the decentralisation debate.
If 84.7% of Tanzania's GDP is produced outside Dar es Salaam, why does Dar es Salaam account for approximately 70% of all national tax revenue? The answer — and its implications for genuine economic decentralisation — is the central focus of this report.
| Indicator | 2020 | 2021 | 2022 | 2023 | 2024/25 | 2025/26 (Proj.) |
|---|---|---|---|---|---|---|
| Real GDP Growth | 4.5% | 4.8% | 4.7% | 5.1% | 5.5% | 6.0% |
| National GDP (TZS Trillion) | ~200 | ~212 | ~221 | ~235 | ~247 | ~261 |
| Tax Revenue (TZS Trillion) | ~17.5 | ~19.0 | ~22.4 | ~25.0 | ~29.2 | ~32.3 |
| Tax-to-GDP Ratio | ~11.5% | ~12.1% | ~12.8% | ~13.0% | ~14.9% | ~13.3% (target) |
| Budget Deficit (% of GDP) | -3.6% | -3.5% | -3.5% | -3.4% | -3.4% | -3.0% |
| Total National Budget (TZS Tn) | ~34 | ~36.6 | ~38.5 | ~44.4 | ~49.35 | ~56.49 |
The TICGL study published in January 2026 — assessed by The Citizen (February 13, 2026) and co-disseminated with REPOA — provides updated and more precise figures for Dar es Salaam's contribution to national tax revenue. This corrects an older figure that had been widely circulated in policy discussions.
The TICGL/REPOA study, confirmed by researcher Amran Bhuzohera at the February 2026 forum on contemporary tax research, establishes that Dar es Salaam accounts for approximately 70% of Tanzania's national tax revenue — a precise, data-verified figure based on TRA revenue statistics and NBS regional GDP data.
Even at the corrected 70% figure, the geographic mismatch between where taxes are collected and where economic activity actually occurs is a defining structural problem of Tanzania's economy. Dar es Salaam produces just 15.3% of national GDP but accounts for 70% of tax revenue — a 4.6x over-contribution ratio explained by headquarters-based taxation.
| Region / Zone | GDP (TZS Trillion) | GDP Share | Tax Revenue Share | Tax Efficiency Ratio | Status |
|---|---|---|---|---|---|
| Dar es Salaam | 36.0 (2023 est.) | 15.3% | ~70% | 4.6× (over-contributes) | Highly Centralised |
| All Other Regions (29+) | ~199 (84.7%) | 84.7% | ~30% | 0.35× (under-contributes) | Structurally Marginalised |
| Lake Zone (Mwanza, Shinyanga, etc.) | ~48.0 est. | ~20.4% | Low (taxed via DSM HQs) | Very Low | Mining, HQ-taxed |
| Northern Zone (Arusha, Kilimanjaro) | ~38.0 est. | ~16.2% | Low-Moderate | Low | Tourism & Agriculture |
| Southern Highlands (Mbeya, Iringa) | ~35.0 est. | ~14.9% | Low | Very Low | Agriculture, under-taxed |
| Central Zone (Dodoma, Singida) | ~28.0 est. | ~11.9% | Very Low | Very Low | Low Formalisation |
| Coastal/Southern Zone (Mtwara, Lindi) | ~20.0 est. | ~8.5% | Low | Very Low | Gas sector, HQ-taxed |
A ratio above 1.0 means the region contributes more taxes than its GDP share warrants. Below 1.0 means the region's actual economic output is effectively being taxed via Dar es Salaam headquarters.
The TICGL study, presented by researcher Amran Bhuzohera at a February 2026 forum on contemporary tax research, explains the mechanism clearly: Tanzania's tax system requires companies to file and remit taxes through their registered head offices. Since the overwhelming majority of large corporations — including mining companies operating in Mwanza and Geita, tourism operators based in Arusha, and agricultural exporters from Mbeya — register their headquarters in Dar es Salaam, all their national revenue flows through the city's tax registration.
This creates a statistical illusion: Dar es Salaam appears to be the engine of the economy from a revenue perspective, when in reality it is primarily a tax registration hub. The actual economic production — the mines, farms, lodges, and factories — occurs hundreds or thousands of kilometres away, in regions that receive little of the fiscal dividend from that production.
Central government transfers remain the primary funding mechanism for LGAs, covering 85–90% of their total budgets. The 2025/26 national budget — at TZS 56.49 trillion, an 11.6% increase from the prior year — continues the trend of growth in nominal transfer volumes. However, high conditionality and earmarking of these transfers severely limit LGA fiscal autonomy, undermining the spirit of decentralisation.
TRA has exceeded its revenue collection targets for two consecutive years (achieving 103% of targets), yet Tanzania maintains a persistent budget deficit of 3.0–3.6% of GDP. The answer lies not in collection efficiency but in the structural narrowness of the tax base and high recurrent expenditure growth.
| Fiscal Year | Central Transfers (TZS Bn) | % of LGA Budget | National Domestic Revenue (TZS Bn) | LGA Own-Source Revenue (TZS Bn) |
|---|---|---|---|---|
| 2020/21 | ~18,000 | 85–90% | 21,828 | 1,147 |
| 2021/22 | ~20,000 | 85–90% | 23,013 | ~1,200 |
| 2022/23 | ~22,500 | 85–90% | 27,921 | ~1,250 |
| 2023/24 | 22,026 | 88% | 29,454 | 1,147 |
| 2024/25 | 24,629 (to Mar. 2025) | 90% | 32,492 | 1,356 |
LGA own-source revenues remain critically underdeveloped, averaging just TZS 1,100–1,356 billion annually — less than 6% of national tax receipts. Meanwhile, LGA total expenditures have grown from TZS 26.6 trillion in 2020/21 to an estimated TZS 42.75 trillion in 2024/25, funded almost entirely by central transfers. The result is near-total fiscal dependency and a rising share of recurrent spending that crowds out development investment.
| Fiscal Year | Own-Source Rev. (TZS Bn) | Recurrent Exp. (TZS Bn) | Development Exp. (TZS Bn) | Total Exp. (TZS Bn) | Exp. as % of Own Revenue |
|---|---|---|---|---|---|
| 2020/21 | 1,147 | 14,884 | 11,702 | 26,586 | 129% (deficit) |
| 2021/22 | ~1,200 | ~16,000 | ~12,500 | ~28,500 | 124% |
| 2022/23 | ~1,250 | ~18,000 | ~13,000 | ~31,000 | 111% |
| 2023/24 | 1,147 | 21,931 | 14,636 | 36,567 | 124% |
| 2024/25 (est.) | 1,356 | ~27,398 | ~15,354 | ~42,752 | 131% (est.) |
| Expenditure Category | 2020/21 Share | 2024/25 Share | Trend |
|---|---|---|---|
| Recurrent (wages, admin, services) | ~55% | ~64% | Rising |
| Development (infrastructure, capital) | ~45% | ~32–36% | Declining |
| Revenue collection vs. targets | 47–53% of target | ~72% of target (Mar. 2025) | Improving |
One of the most significant findings of the TICGL 2026 study is the sheer scale of Tanzania's informal economy and its direct impact on both the tax base and the effectiveness of economic decentralisation. Informality is the root cause of the narrow tax base — not inefficient TRA collection. The informal sector represents a massive missed fiscal opportunity, particularly in non-DSM regions where formality rates are lowest.
| Metric | Value (2025) | Source / Note |
|---|---|---|
| Informal economy as % of GDP | ~45% of GDP | TICGL/REPOA 2026 |
| Informal economy — absolute value | TZS 105.7 trillion (~$41.2 billion) | TICGL 2026 |
| Annual tax shortfall from informality | TZS 14.1 trillion | ~45% of total tax revenue |
| Share of informal transactions captured digitally | 5–7% only | Despite mobile money growth |
| Mobile money transactions (2025) | TZS 223.4 trillion | ~95% of annual GDP |
| Uncollected potential taxes (other regions) | TZS 20+ trillion | TICGL 2026 estimate |
| SMEs operating informally to avoid compliance | ~72% of surveyed SMEs | TICGL survey of 250 SMEs, 5 regions |
| Tanzania informal economy vs. EAC peers | 2nd largest in EAC | After Zimbabwe in sub-region |
| DSM alone — informal GDP | TZS 6.2 trillion | 22.5% of city GDP; undercounted by TZS 2.3Tn |
Tanzania processed TZS 223.4 trillion in mobile money transactions in 2025 — nearly 95% of annual GDP — yet only 5–7% of informal sector transactions are captured in the tax system. This represents the single largest untapped fiscal opportunity for genuine decentralisation: if even 20% of mobile money transactions could be brought into the tax net, it would add approximately TZS 4.5 trillion annually to government revenues.
Tanzania's GDP is diversified across multiple sectors, but a critical structural issue emerges when examining where economic activity occurs versus where taxes are registered. Agriculture remains the largest sector at 28.7% of GDP (2023) but is largely informal and under-taxed. Mining produced a significant peak in 2022 (9.8% of GDP), yet the sector's taxes flow entirely through Dar es Salaam headquarters.
| Sector | 2021 (%) | 2022 (%) | 2023 (%) | Where Activity Occurs | Tax Registered Where? |
|---|---|---|---|---|---|
| Agriculture (incl. Livestock & Fisheries) | 27.0% | 26.0% | 28.7% | All regions (esp. Southern Highlands) | Local / Largely Informal |
| Construction & Infrastructure | 16.0% | 15.0% | 14.5% | Nationwide + DSM | DSM (Central Govt) |
| Wholesale & Retail Trade | 9.0% | 9.0% | 9.0% | All regions | Mostly DSM HQs |
| Transport & Communications | 8.0% | 8.0% | 8.0% | Nationwide | DSM HQs |
| Manufacturing & Industry | 9.0% | 8.4% | 9.0% | DSM, Mwanza, Arusha | DSM HQs |
| Mining & Quarrying | 5.0% | 9.8% ⚡ | 5.0% | Lake Zone, Lindi, Mtwara | DSM HQs (key issue) |
| Tourism & Hospitality | 5.7% | 6.0% | 7.0% | Northern & Lake Zones | DSM HQs (partly) |
| Financial Services | ~7.0% | ~7.0% | 15.4% 🚀 | DSM dominant | DSM |
SMEs are Tanzania's economic backbone — contributing approximately 35% of national GDP and employing over 6 million people across all regions. Yet the TICGL 2026 analysis reveals that the tax architecture is systematically undermining SME growth, with cascading negative effects on regional economic development and LGA own-source revenue generation.
Tanzania's corporate tax rate for SMEs is 30% — among the highest in East Africa. Rwanda, by contrast, has adopted a 3% turnover tax for SMEs, which generated over 60% compliance growth. This single policy difference helps explain why Rwanda's tax-to-GDP ratio significantly exceeds Tanzania's.
| Finding | Data Point | Implication for Decentralisation |
|---|---|---|
| High tax rates as primary growth obstacle | 78% of SMEs | Discourages formalization across all regions |
| Tax filing procedures rated excessively complex | 76% of SMEs | Rural LGAs lack support infrastructure |
| SMEs operating informally to avoid compliance | 72% of SMEs | Directly shrinks regional tax bases |
| Annual hours spent on tax compliance | 248 hours/year avg. | SMEs need external consultants; rural areas lack access |
| Combined tax burden (typical DSM SME) | >18% of annual revenue | Corp. tax + VAT + municipal levies |
| SMEs reducing staff due to tax strain | 56% of SMEs | Unemployment concentrated in regional towns |
| SME contribution to national GDP | ~35% | Backbone of regional economies, yet under-supported |
| Corporate tax rate (Tanzania) | 30% | Among highest in EAC; Rwanda SMEs pay 3% turnover tax |
| VAT pending refunds (2025) | TZS 1.4–1.5 trillion (~$650M) | Cash flow crisis for exporters and capital-intensive businesses |
Despite the structural fiscal challenges, Tanzania's decentralisation framework has delivered some meaningful improvements in service delivery metrics — particularly in education enrolment and health coverage. However, quality indicators lag significantly, and the declining share of LGA development expenditure threatens to reverse hard-won gains.
| Indicator | Baseline | Latest (2024/25) | Change |
|---|---|---|---|
| Primary school enrolment | 4.8M (2001) | 10.6M (2019) | +121% |
| Community Health Fund households | 543,328 (2012/13) | 2,251,055 (2017/18) | +315% |
| LGA revenue collection efficiency | 47–53% of targets | ~72% of target (Mar. 2025) | Improving |
| Teacher quality / infrastructure | Low / Inadequate | Remains low / inadequate | Stagnant |
| PPP / development project disbursement | ~60% historical | 47.4% hit rate (2023/24) | Deteriorated |
| 2025/26 education allocation | — | TZS 444.7 billion (fee-free) | Sustained |
| 2025/26 healthcare allocation | — | TZS 414.7 billion | Sustained |
Primary school enrolment has more than doubled since 2001 (+121%), and the Community Health Fund has expanded nearly 5-fold since 2012/13. The 2025/26 budget sustains TZS 444.7 billion for fee-free education and TZS 414.7 billion for healthcare — demonstrating the central government's continued commitment to social service delivery even amid fiscal pressures.
A significant development announced in January 2026 is the Integrated Digital Revenue Administration System (IDRAS) by TRA. This system represents the most concrete technology-based opportunity to reform the geographic concentration of tax collection and dramatically expand Tanzania's tax base — particularly in rural and regional LGAs where informal sector activity is highest.
| IDRAS Feature | Details & Projected Impact |
|---|---|
| Real-time integration | Links TRA, banks, BRELA, and mobile money platforms to track economic activity across all regions in real time. |
| Mobile-first filing (USSD + apps) | SMEs can file in under 10 minutes without external consultants. Critical for rural LGAs with low ICT infrastructure. |
| AI-powered risk analytics | Identifies high-risk non-compliance while reducing harassment of compliant businesses — addressing a key SME grievance. |
| M-Pesa / Tigo Pesa / Airtel Money integration | Instant tax payments remove barriers for informal sector operators. Key to capturing part of the TZS 223.4 trillion mobile money economy. |
| Comparator outcomes (Kenya iTax / Rwanda e-Filing) | Countries with similar systems saw 20–35% increase in registered taxpayers within 3 years of implementation. |
| Potential if Tanzania reaches Rwanda tax-to-GDP parity | +2.1–3.4 percentage points improvement — equivalent to TZS 4.5–7.3 trillion in additional annual revenue. |
If IDRAS implementation reaches rural LGAs by 2027 as projected, and Tanzania closes even half the gap to Rwanda's e-filing compliance rates, the system could generate an estimated TZS 4.5–7.3 trillion in additional annual tax revenue — equivalent to 30–50% of current LGA total own-source revenue. This alone would represent a transformational shift in LGA fiscal capacity.
Despite positive macroeconomic momentum, Tanzania's decentralisation framework faces ten interconnected structural challenges. These challenges are deeply rooted in the architecture of the tax system, the scale of informality, and the governance constraints on LGA fiscal autonomy. The TICGL 2026 research identifies and quantifies each challenge with current data.
| Challenge | Data Evidence | Source |
|---|---|---|
| HQ-based taxation (geographic mismatch) | 70% of taxes from DSM (15.3% of GDP); 70% of GDP produced elsewhere | TICGL/REPOA 2026 |
| Narrow tax base | Tax-to-GDP: 14.9% vs SSA avg 18.6%; deficit persists despite 103% TRA target achievement | TICGL / MoF 2025 |
| Massive informal sector | 45% of GDP (TZS 105.7Tn) outside formal structures; TZS 14.1Tn annual tax shortfall | TICGL/REPOA 2026 |
| High LGA fiscal dependency | 85–90% of LGA budgets from central transfers; own-source = <6% of national taxes | PO-RALG / MoF 2025 |
| Recurrent vs. development squeeze | Recurrent spending: 55% (2020) → 64% (2025) of LGA total; development declining | Budget Exec. Reports |
| SME over-taxation | Combined burden >18% of revenue; 78% cite taxes as top obstacle; 72% operate informally | TICGL 250-SME Survey 2026 |
| VAT refund crisis | TZS 1.4–1.5 trillion in pending refunds; avg wait 12–24 months vs. statutory 30 days | TICGL / EY 2025 |
| Conditional grant restrictions | Most transfers earmarked; LGAs cannot reallocate to local priorities | PO-RALG 2024 |
| Uncollected regional taxes | TZS 20+ trillion in potential taxes uncollected in non-DSM regions | TICGL/REPOA 2026 |
| Regional per capita disparity | DSM: TZS 5.7M vs Simiyu: TZS 1.5M — a 3.7× gap | NBS / World Bank 2023 |
TRA consistently exceeds its revenue collection targets — achieving 103% of targets for two consecutive years — yet Tanzania maintains a persistent budget deficit. The problem is not TRA's collection capacity. It is the structural narrowness of the tax base: the majority of economic activity remains outside the formal tax net, concentrated in regions that lack the administrative infrastructure to bring it in.
Against the backdrop of structural challenges, the TICGL 2026 research identifies nine high-impact opportunities that could fundamentally transform Tanzania's fiscal decentralisation landscape. These range from digital technology (IDRAS) and natural resource revenue devolution to infrastructure-driven regional integration via the SGR and JNHPP.
| Opportunity | Data / Evidence | Projected Benefit |
|---|---|---|
| IDRAS Digital Tax System | Announced Jan 2026; mobile-first filing; AI risk analytics | 60–70% compliance burden reduction; expands regional tax base |
| Mobile Money Tax Capture | TZS 223.4 Tn in transactions (2025); only 5–7% captured | Capturing 20% would add ~TZS 4.5 trillion to revenue |
| SME Formalisation Drive | 72% of SMEs informal; TZS 20+ Tn uncollected outside DSM | Regional tax base expansion; LGA own-source revenue growth |
| Regional HQ Incentives | Relocate company registrations to producing regions | Redirect tax receipts to where economic activity occurs |
| Mining Revenue Sharing | Gold exports +42.1% to USD 4.7B (2025); taxed via DSM HQs | Royalties routed directly to Mara, Shinyanga, Geita LGAs |
| Tourism Revenue Devolution | 2.3M visitors (2025); revenue +37%; Arusha/Lake Zone-based | LGA-level tourism levies and dedicated development funds |
| Nyerere Hydropower (JNHPP) | Power sector grew 19% in Q1 2025 | Enables industry outside DSM; reduces urban concentration |
| SGR Rail + DSM Port Expansion | Port to double cargo capacity by 2032; SGR links inland regions | Peripheral LGAs gain market access; reduces DSM-dependency |
| Natural Gas (Ntorya / Lindi-Mtwara) | 25-year licence; 40 mmcfd projected output | Mtwara, Lindi LGAs: direct revenue uplift from gas royalties |
All major international institutions project accelerating GDP growth for Tanzania through 2026, underpinned by infrastructure investment, agricultural resilience, tourism recovery, and prudent fiscal management. The TICGL estimate adds an additional reform premium: if the fiscal decentralisation reforms recommended in this report are implemented, Tanzania could add 0.5–1.0 percentage points above the baseline consensus forecast.
| Institution | 2024 (Actual) | 2025 (Forecast) | 2026 (Forecast) | Key Drivers |
|---|---|---|---|---|
| World Bank | 5.5% | 6.0% | 6.4% | Infrastructure, Agriculture |
| IMF | 5.5% | 6.1% | 7.0% | Structural Reforms |
| African Development Bank | 5.7% | 6.0% | 6.5% | Agriculture, Tourism, Industry |
| Bank of Tanzania | 5.5% | 6.0%+ | 6.0%+ | Domestic demand, FDI |
| Ministry of Finance (Budget Target) | 5.5% | 6.0% | 6.0%+ | Budget 2025/26 projection |
| 🏆 TICGL Estimate (with decentralisation reforms) | 5.5% | 6.0–6.5% | 6.5–7.5% | +0.5–1.0pp from LGA fiscal reform |
Tanzania's government has articulated a Vision 2050 target of a USD 1 trillion economy. At the current 5.5–6.0% growth rate, achieving this target remains a multi-decade challenge. With genuine fiscal decentralisation reforms unlocking the potential of all 185 LGAs, TICGL estimates an additional 0.5–1.0 percentage points of annual GDP growth — compounding significantly over 25 years and materially accelerating the Vision 2050 timeline.
Drawing on the TICGL 2026 research findings and the broader data presented in this report, the following eight evidence-based reforms are recommended to achieve genuine economic decentralisation in Tanzania. Each recommendation is directly tied to a quantified data finding.
The January 2026 TICGL/REPOA study represents a significant advancement in our understanding of Tanzania's economic decentralisation challenge. Its most important contribution is the corrected and more nuanced reading of Dar es Salaam's role: the capital is not simply the dominant economic engine — it is primarily a tax registration hub, collecting taxes on behalf of economic activity that occurs across all 29+ regions of the country.
This is not primarily a story of Dar es Salaam's economic dominance — it is a story of headquarters-based taxation and a structurally narrow tax base. Mining revenues from Mwanza, agricultural exports from Mbeya, and tourism receipts from Arusha are all flowing through Dar es Salaam's tax registers rather than into the treasuries of the LGAs where the economic activity actually takes place. This single structural feature arguably does more to undermine genuine decentralisation than any other policy failure.
TRA consistently exceeds its revenue collection targets (103% for two consecutive years), yet Tanzania maintains a persistent budget deficit. The answer lies not in collection inefficiency but in the structural narrowness of the tax base: TZS 105.7 trillion in informal economic activity, TZS 20+ trillion in uncollected regional taxes, and TZS 223.4 trillion in mobile money transactions — of which only 5–7% are captured in the tax system.
Implemented together, the reforms recommended in this report could lift Tanzania's GDP growth by an additional 0.5–1.0 percentage points annually, accelerate the journey toward the Vision 2050 USD 1 trillion economy target, and — most critically for decentralisation — begin to channel fiscal resources to the regions that generate the underlying wealth but currently receive little of the fiscal dividend.
This report was prepared for research and educational purposes by the Tanzania Investment and Consultant Group Ltd. (TICGL). Key sources: TICGL/REPOA (January 2026); The Citizen (February 13, 2026); NBS Tanzania; Ministry of Finance; World Bank; African Development Bank; Bank of Tanzania; PO-RALG; IMF. Data covers fiscal years 2004/05 through 2025/26. Regional GDP estimates are TICGL calculations based on NBS methodology. Tax revenue data sourced from TRA Revenue Statistics and MoF Budget Execution Reports.