June 2025 | Insight | Africa | 6 min read

Tanzania’s 2025/26 Budget tabled under the theme “Realizing Competitiveness and Industrialization for Human Development” signals a policy direction anchored in industrial expansion, social investment and prudent macroeconomic management. Aligned with the East African Community’s broader agenda the Budget underscores a growth model driven by infrastructure completion export diversification and domestic resource mobilization.

Strategic Priorities and Economic Outlook

Continuity remains a key feature with the Budget reinforcing Tanzania’s Third Five-Year Development Plan (2021/22–2025/26). Flagship projects in infrastructure, agro-processing and human capital development take precedence alongside new commitments such as election preparations and stadium projects for AFCON 2027—both funded domestically underlining fiscal self-reliance.

Key macroeconomic indicators project stability and moderate acceleration:

• Real GDP Growth: 6.0% target for FY 2025/26 (up from 5.5% in 2024)
• Inflation: Expected to remain within 3–5%
• Fiscal Deficit: Narrowing to 3.0% of GDP
• Foreign Reserves: Maintained at minimum four months of imports
• Domestic Revenue: Projected at TZS 40.47 trillion rising to 16.7% of GDP

Tax & Legislative Reforms: Broadening the Base

The Budget introduces bold tax measures to enhance compliance diversify revenue sources and support national priorities.

1. Corporate & Income Tax Changes

• 10% Withholding on Retained Earnings: Profits not distributed within 6 months now subject to a 10% tax. Aims to encourage dividend payouts but may constrain reinvestment and liquidity.
• Alternative Minimum Tax: For companies reporting losses over three consecutive years AMT doubles from 0.5% to 1% of turnover.
• Loss Carry-Forward Limits: For mining, oil & gas, reduced from 70% to 60% to accelerate taxable income recognition.
• Income Tax Relief: Introduced for small-scale transport operators (e.g. motorcycles, light cargo vehicles) with revised presumptive tax brackets for heavier vehicles.

2. Sector-Specific Levies

• Forestry Products: 3.5% levy on sale value per consignment; estimated yield: TZS 111.6 billion
• Artisanal Salt: 2% withholding on raw salt purchases from small miners
• Foreign Insurance: Withholding tax doubled from 5% to 10% on premiums and reinsurance payments

3. Gaming & Extractives

• Gaming Ads: 10% withholding tax on commission payments from sports betting advertisements
• Extractives Services: Technical services withholding tax increased from 5% to 10%

Health Financing Through Targeted Excise

Health-related taxes are earmarked for long-term impact:

• AIDS Trust Fund: 70% of additional alcohol excise revenue (~TZS 105 billion)
• Universal Health Fund (UHF): 30% of alcohol excise + portion of telecom levy (≈TZS 120 billion)
• Fuel Levy: TZS 10/litre supports roads and emergency medical transport infrastructure

Trade & Investment Incentives

Common External Tariff (CET) Adjustments

To protect domestic industries while facilitating strategic imports:

• Temporary Increases: Applied to steel, fiberboard, plywood and select construction materials
• Exemptions: Granted for buses (urban transport projects), fiscal device inputs GRP pipe components
• Permanent Tariff: 10% rise on toy imports to boost local industry and revenue

Compliance & Regulatory Reforms

The Budget’s second regulatory blueprint pushes for a friendlier business environment:

• Digital Services Tax (DST): 2% levy expanded to cover streaming, ride-hailing and e-commerce
• Mandatory EFD Use: Enforced in supermarkets, hotels ,fuel stations—with a 3% withholding on public contracts if non-compliant
• Levies Rationalised: 383 fees scrapped or reduced; businesses save TZS 50 billion in red tape
• Permit Streamlining: New roadmap targets licensing across 12 ministries via one-stop portals

Final Take

Tanzania’s 2025/26 Budget reflects a delicate balancing act—sustaining economic momentum while introducing disciplined revenue reforms. Taxpayers face increased compliance but the emphasis on industrialization, health and infrastructure sets a clear signal to both investors and citizens: economic transformation remains the national priority.