
Dar es Salaam, Tanzania
The first Breakfast Debate of 2025, organized by Policy Forum, brought attention to significant concerns regarding Tanzania’s tax system, which, according to experts, is facing stagnation in both tax collection and domestic resource mobilization (DRM). These challenges are increasingly seen as barriers to achieving both economic growth and social equity in the country.
One of the central issues discussed during the event is the tax burden faced by both individuals and businesses. Employees are subject to deductions that can reach up to 59% of their income, encompassing various taxes, student loan repayments, and social security contributions. For businesses, the tax landscape includes a 30% corporate tax rate, 18% VAT, and a range of additional levies, penalties, and licenses. While these taxes are essential for funding government programs, the high burden can also create disincentives for compliance and investment, which may slow down economic progress.
Equally concerning are issues related to governance and transparency in Tanzania’s financial management. Despite efforts to improve public sector oversight, challenges such as corruption, mismanagement, and a lack of accountability remain. A reduction in the publication of key revenue collections, including taxes and levies, has further limited transparency, which can erode public trust. Experts argue that greater transparency is necessary to ensure that citizens can see the direct benefits of their tax contributions, especially in improving public services and infrastructure.
Political factors have also played a role in the inefficiencies observed in Tanzania’s tax system. Policy decisions, sometimes influenced by the need to maintain voter support, have led to reluctance to fully enforce tax regulations. This selective enforcement has been cited as one of the reasons why tax collection has not met its full potential. A more consistent and transparent approach to tax enforcement is essential to building a robust tax system and supporting broader economic growth.
In addition to domestic challenges, Tanzania is also losing significant resources through illicit financial flows, harmful tax incentives, and tax evasion. According to the United Nations Conference on Trade and Development (UNCTAD), Africa as a whole loses an estimated $88.6 billion annually due to such inefficiencies. For Tanzania, these losses mean fewer resources available to invest in critical sectors, such as education, healthcare, and infrastructure.
The debate emphasized the need for comprehensive tax reforms to address these challenges. Experts called for broadening the tax base by formalizing businesses and workers in the informal sector. Expanding the tax base would help to capture revenue that is currently not accounted for and would contribute to the country’s overall economic stability. The government was urged to adopt strategies to facilitate the formalization process, making it easier for informal sector businesses and workers to transition into the formal economy.
Moreover, the need for a more balanced tax structure was highlighted, with suggestions to lower the tax burden on both individuals and corporations. A reduction in income taxes, corporate taxes, and VAT would not only relieve pressure on taxpayers but also encourage voluntary compliance, which in turn could lead to improved revenue generation. It was also suggested that efforts to rejoin the Open Government Partnership (OGP) could further improve governance and transparency, providing greater accountability in public finances.
The modernization of tax collection methods was another key point discussed at the event. The implementation of digital tools such as electronic invoicing (EFDs) and automated systems could streamline revenue collection processes and reduce leakages, making the system more efficient and effective. Experts also highlighted the importance of strengthening local government revenue collection mechanisms, ensuring that public services and resources are equitably distributed across the country.
While the issue of Tanzania’s inclusion on the Financial Action Task Force (FATF) Grey List was acknowledged, the broader focus of the debate remained on addressing the internal inefficiencies in tax collection and financial governance. Experts emphasized that ensuring a fair, transparent, and efficient tax system would be critical to fostering investor confidence, improving social services, and supporting long-term economic growth.
In conclusion, the debate underscored the need for a holistic approach to tax reform that encompasses both governance and policy changes. By addressing these challenges and implementing strategic reforms, Tanzania has the potential to build a more effective, transparent, and equitable tax system—one that can support sustainable economic growth and ensure greater social equity for all its citizens.