Tax Reform in Tanzania

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Tax Reform in Tanzania had been adopted to increase the revenue from tax but without raising the tax rates.

Reasons Behind Tax Reform:
  • From 1992, Tanzania had been suffering from several fiscal problems due to a big difference between the government’s huge expenditure and stagnant revenue.
  • In spite of the formation of the Tax Revenue Authority in Tanzania(1996) the revenue generation from tax was not up to the mark.
  • In the year of 1997- 98 Tanzania’s revenue from tax was only 12.4% of the gross domestic product which was the worst figure among the region.
  • The tendency to avoid tax was increasing due to the institutional weaknesses, that is, old fashioned business processes and poor infrastructure of the Tax Revenue Authority.
    Tax Reform in Tanzania With the Help of the IDA:

    In 1999, the International Development Association(IDA) came to help Tanzania in the areas of tax reform. The IDA financed Tanzania to increase the tax revenue through the Tax Administration Project. The IDA paved the way to improve the legal framework and the tax administration. The tax base had been broaden. With the help of the International Development Association’s technical assistance the Tanzanian government governed the strategy and framework for tax reforms.

    Effects of Tax Reform in Tanzania:
    1. The amount of annual revenue generated in Tanzania was 1.7 billion US dollars in the year of 2005 – 06 whereas in 2002 – 03 it was 1.1.billion US dollars.
    2. The registered income tax payers raised in number from one lac ninety thousand in 2003 to two lac ninety thousand in 2006. Moreover, the number of designated large taxpayers also increased by 186 from 2003.
    3. The percentage amount of custom clearances, that was made within a day time, increased by 65% compared to the year 2003.
    4. The amount of tax arrear had been increased by 66% in 2005 compared to the amount in 2003.
    5. The average time to identify the stop filers had been reduced. In 2003 it took 28 days to complete the counting whereas in 2005 the figure was 4.
    6. The Tanzanian tax authority was able to present a modern and as well as efficient management practices in the administration.
    7. Monthly revenue from Value Added Tax refund in 2006 increased by 26% from the year 2003.

    Due to impressive results of tax reform in Tanzania, other countries, for example, Nigeria and Ghana, got interested to replicate Tanzania’s reform strategies.

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