Tanzania’s 2025/26 Budget Rises to TZS 56.49 trillion Targeting 6.0% Growth and TZS 29.17 trillion Tax Revenue
June 15, 2025
Tanzania’s revenue collection, particularly through taxes on businesses and services, has seen steady improvement, yet challenges like tax evasion and administrative inefficiencies persist. The 2024/2025 budget of TZS 49.35 trillion (USD 18.85 billion) delivered 5.5% real GDP growth, collecting TZS 45.07 trillion (89.6% of TZS 50.29 trillion target), with domestic revenue at TZS 29.83 trillion […]
Tanzania’s revenue collection, particularly through taxes on businesses and services, has seen steady improvement, yet challenges like tax evasion and administrative inefficiencies persist. The 2024/2025 budget of TZS 49.35 trillion (USD 18.85 billion) delivered 5.5% real GDP growth, collecting TZS 45.07 trillion (89.6% of TZS 50.29 trillion target), with domestic revenue at TZS 29.83 trillion (15.0% of GDP). This supported low-income Tanzanians through TZS 708.6 billion in fertilizer subsidies, TZS 444.7 billion for fee-free education, and infrastructure projects creating jobs. The 2025/2026 budget, projected at TZS 56.49 trillion (USD 22.07 billion), an 11.6% increase, targets 6.0% GDP growth with TZS 38.9 trillion in domestic revenue (16.7% of GDP) and introduces tax reforms to boost compliance. This case study evaluates whether these projections, given the state of revenue and taxation, can achieve the goal of promoting economic growth for low-income Tanzanians, using key figures and sectoral analysis.
1. State of Revenue Collection and Taxation in Tanzania
Tanzania’s revenue mobilization relies heavily on taxes from businesses and services, including income tax, VAT, and import duties. The current tax-to-GDP ratio of 14.9% is below the Sub-Saharan Africa average of 18.6%, indicating room for improvement. Recent performance and challenges provide context for the 2025/2026 projections.
2024/2025 Revenue Performance:
Total Revenue: TZS 45.07 trillion (89.6% of TZS 50.29 trillion target), with TZS 29.83 trillion from domestic sources (15.0% of GDP).
Tax Revenue: By February 2025, TZS 22.38 trillion was collected, driven by income tax (TZS 1,573.8 billion in January 2025 alone) and import duties (TZS 962.2 billion), reflecting business growth and trade activity.
Non-Tax Revenue: Increased by 40% to TZS 884.7 billion (July 2024–May 2025), due to dividends and digital systems.
Achievements: January 2025 collections reached TZS 3,877.4 billion, exceeding targets by 8.6%, indicating improved compliance and economic activity.
Challenges: TRA faced criticism for malpractices, prompting a presidential commission review. Lower taxes on local goods suggest weaker domestic demand.
Taxation on Businesses and Services:
Income Tax: Strong collections (TZS 1,573.8 billion in January 2025) reflect business growth, particularly in ICT (13.5% growth projected by 2026) and mining (9.3%).
VAT and Exemptions: The 2024/2025 budget introduced VAT exemptions for fertilizers and edible oils, benefiting low-income farmers, but repealed exemptions on precious metals to boost revenue.
Import Duties: Contributed 40% of tax revenue in H1 2024/2025, supporting fiscal stability despite global challenges.
Reforms: Digital systems and oversight have reduced leakages, but the informal sector (~30% of GDP) and agriculture remain under-taxed.
2025/2026 Revenue Projections:
Domestic Revenue: TZS 38.9 trillion (16.7% of GDP, up from 15.0%), with TRA targeting TZS 29.17 trillion (13.3% of GDP) from taxes.
Total Revenue: Expected to exceed TZS 50.29 trillion, financed by TZS 40.47 trillion domestic revenue and TZS 14.95 trillion loans.
New Taxes: Mandatory travel insurance for visitors, removal of EPZ/SEZ tax holidays, and 20% gold output for local processing aim to boost revenue.
Goal: Increase tax-to-GDP ratio to 14% by 2050, targeting TZS 350 trillion annually.
Assessment: The 8.6% revenue surplus in January 2025 and 40% non-tax revenue growth suggest Tanzania can achieve TZS 38.9 trillion if TRA reforms address inefficiencies and broaden the tax base (e.g., informal sector). However, global economic risks and domestic demand weaknesses could hinder collections.
2. 2025/2026 Budget Framework and Economic Growth Target
The TZS 56.49 trillion budget, an 11.6% increase from TZS 49.35 trillion in 2024/2025, aims for 6.0% real GDP growth. Key financial and economic strategies include:
Budget Structure:
Recurrent Expenditure: TZS 38.6 trillion (68.3% of budget) for wages, debt servicing, and elections.
Development Expenditure: TZS 16.4 trillion (29.0% of budget) for SGR, JNHPP, and social projects.
2024/2025 achieved 5.5% growth with TZS 15.75 trillion development spending, despite revenue shortfalls (89.6%).
2025/2026’s TZS 16.4 trillion development budget and 16.7% GDP revenue target position it to exceed prior performance if execution is efficient.
Assessment: The budget’s 6.0% growth target is feasible, supported by projections from the IMF (6.0% in 2025), AfDB (6.0%), and local estimates (6.1–6.4% by 2026) (Web ID: 7, 8, 12). Increased domestic revenue (TZS 38.9 trillion) and strategic investments could drive growth, but success depends on revenue collection and global stability.
3. Promoting Economic Growth for Low-Income Tanzanians
The budget aims to uplift low-income Tanzanians (26.4% abject poverty, 8.0% extreme poverty in 2018) through sectoral investments and social programs. Below is an analysis of key measures and their potential impact.
a. Agriculture
Context:
Contributes 26.5% to GDP, employs ~65% of Tanzanians.
TZS 708.6 billion in fertilizer subsidies (2021/22–2023/24) reduced costs by 50%, boosting yields.
VAT exemptions on fertilizers and seeds supported farmers.
2025/2026 Measures:
Continued subsidies (inferred from prior budgets).
TADB loans via a ¥22.7 billion Japan agreement for climate-resilient farming.
Irrigation and value addition to enhance exports (11.6% of GDP in 2024).
Impact:
Could contribute 1.0–1.5 percentage points to GDP growth (4–6% sectoral growth).
Subsidies and loans increase incomes for low-income farmers, potentially reducing extreme poverty below 8.0%.
Exports (6.0% growth projected in 2025) stabilize prices via reserves (USD 5.7 billion in 2024).
b. Industry
Context:
Construction (13.2%) and mining (9.0%) grew via TZS 1.68 trillion for SGR and TZS 574.8 billion for JNHPP/rural electrification in 2024/2025.
Mining revenue rose due to gold exports.
2025/2026 Measures:
TZS 2.75 trillion for transport (SGR, ports) and TZS 2.2 trillion for energy (JNHPP, rural electrification).
SIDO programs and mining reforms (20% gold for local processing).
Completion of JNHPP (2,115 MW) to reduce energy costs.
Impact:
Could contribute 1.5–2.0 percentage points to GDP growth (7–8% sectoral growth).
Jobs from SGR and JNHPP benefit low-income workers.
Cheaper energy lowers business costs, reducing prices for consumers.
c. Services
Context:
Services (~40–50% of GDP) grew via tourism (USD 7.2 billion, 1.4 million visitors) and ICT (12.5% growth) in 2024/2025.
Exports at 20.3% of GDP narrowed the trade deficit to USD 5,157.2 million.
2025/2026 Measures:
TZS 359.9 billion for tourism promotion.
ICT investments (13.5% growth by 2026) via digital infrastructure.
SGR and Air Tanzania to reduce transport costs.
Impact:
Could contribute 2.5–3.0 percentage points to GDP growth (6–7% sectoral growth).
Tourism and ICT jobs are accessible to low-income workers.
Lower transport costs reduce commodity prices.
d. Social Programs
Context:
TZS 444.7 billion for fee-free education, TZS 636.0 billion for student loans, and TZS 414.7 billion for healthcare in 2024/2025 improved access.
PSSN cash transfers reduced child malnutrition.
2025/2026 Measures:
Sustained or increased education and health funding (e.g., training 28,000 health workers).
PSSN expansion for vulnerable households.
TZS 378.7 billion (2024/2025 level) for water projects, inferred to continue.
Impact:
Enhances skills and health, reducing poverty cycles.
Cash transfers improve food security for low-income households.
4. Can the Budget Achieve the Goal?
Strengths:
Revenue Potential: TZS 38.9 trillion (16.7% of GDP) is achievable, given 8.6% surplus in January 2025 and 40% non-tax revenue growth (Web ID: 5, 6). Tax reforms (e.g., gold processing) could broaden the base.
Economic Growth: 6.0% target aligns with IMF and AfDB projections, supported by TZS 16.4 trillion development spending.
Low-Income Focus: Subsidies (TZS 708.6 billion historically), education (TZS 444.7 billion), health (TZS 414.7 billion), and energy (TZS 2.2 trillion) directly benefit low-income Tanzanians, potentially reducing extreme poverty below 8.0%.
Fiscal Stability: Public debt at 46.5% of GDP and reserves at 4.4 months ensure sustainability.
Challenges:
Revenue Risks: 2024/2025’s 89.6% shortfall (TZS 45.07 trillion vs. TZS 50.29 trillion) and TRA inefficiencies could jeopardize TZS 38.9 trillion.
Taxation Burden: New taxes (e.g., travel insurance) and EPZ/SEZ changes may strain businesses, reducing job creation.
External Risks: Currency depreciation (TZS 2,585/USD) and global shocks could raise import costs, affecting low-income consumers.
Implementation: Delays in SGR or JNHPP could limit economic benefits.
Conclusion
The TZS 56.49 trillion 2025/2026 budget has strong potential to promote economic growth for low-income Tanzanians by achieving 6.0% GDP growth and reducing poverty through targeted investments. However, success hinges on improving revenue collection (TZS 38.9 trillion), addressing TRA inefficiencies, and mitigating external risks. If executed effectively, the budget could surpass the 2024/2025 impact, uplifting low-income Tanzanians through jobs, affordability, and social services.
