Tanzania’s tax reforms and policy adjustments have significantly shaped the business landscape and economic trajectory. These reforms have enhanced revenue collection while identifying policy areas that, with adjustments, could spur further growth and broaden Tanzania’s investment opportunities.
1. Current Taxation Landscape in Tanzania
In 2023/2024, Tanzania’s tax revenue reached approximately TZS 27.64 trillion, showing a robust 14.47% growth from the previous year. Major revenue contributions came from services (28.2%), trade (23.6%), and manufacturing (17.7%). Although recent reforms have increased collection efficiency, compliance costs remain a challenge, averaging 2% of annual revenue for businesses, particularly small and medium enterprises (SMEs). This burden can hinder growth and disincentivize formalization within the economy, impacting the government's ability to capture potential tax revenues.
2. Policy and Regulatory Challenges
Tanzania’s regulatory and tax framework presents complexities that are particularly challenging for SMEs. Despite recent improvements, the World Bank’s Ease of Doing Business Index (2024) scores Tanzania at 59, indicating moderate entry barriers. While comprehensive, the regulatory environment's high compliance costs and complexity rank Tanzania at 162 out of 190 for tax compliance ease. These burdens limit profitability for many businesses, especially SMEs, reducing available resources for reinvestment.
3. Foreign Direct Investment and Sectoral Growth Potential
In 2023/2024, Foreign Direct Investment (FDI) inflows reached approximately USD 1.5 billion, with strong interest in sectors such as energy, mining, and agriculture. With targeted policy reforms, FDI could increase at an annual rate of 10%, reaching an estimated USD 2.8 billion by 2030. Additionally, sectoral growth projections, such as an annual increase of 6-8% in agriculture and 7% in manufacturing, indicate a promising outlook if policies continue to incentivize investment and tax compliance.
4. Role of Key Stakeholders in Driving Tax Compliance and Economic Growth
The Tanzania Revenue Authority (TRA) is essential in enforcing tax compliance through initiatives like taxpayer education and digital tax solutions, such as Electronic Fiscal Devices (EFDs), which ensure real-time tracking and transparency. Local Government Authorities (LGAs) also play a role, especially in formalizing the informal sector through local levies. Industry organizations, including the Tanzania Private Sector Foundation (TPSF) and Confederation of Tanzanian Industries (CTI), advocate for policies that streamline tax compliance and reduce SME burdens to foster sectoral growth and economic resilience.
5. Key Figures: Projections for 2030
If current reforms continue, Tanzania's total tax revenue could increase from TZS 27.64 trillion in 2023/2024 to TZS 40 trillion by 2030. A reduction in compliance costs to 1.5% of revenue could free up resources for business expansion. Additionally, with a projected Ease of Doing Business Score increase to 70 by 2030, Tanzania’s economic environment is expected to be more attractive for investment, supporting sustained growth across key sectors.
| Economic Indicator | Current (2023/2024) | Projected (2030) | Growth Rate |
| Total Tax Revenue (TZS trillion) | 27.64 | 40 | 8% |
| FDI Inflows (USD billion) | 1.5 | 2.8 | 10% |
| Compliance Cost (% of revenue) | 2 | 1.5 | Decrease |
| Ease of Doing Business Score | 59 | 70 | Increase |
Conclusion
Through targeted tax reforms, Tanzania can strengthen its tax revenue base, reduce compliance costs, and enhance its attractiveness as an investment destination. This will drive sustainable economic growth, create jobs, and improve Tanzania’s competitiveness within the East African region. For these reforms to succeed, collaboration among government agencies, private sector organizations, and civil society is crucial to establishing an inclusive economic environment that benefits all Tanzanians.