By Business Insider Reporter
Tanzania’s Finance Act, 2025 – anchoring the country’s TSh56 trillion national budget – signals a bold pivot in fiscal policy, according to analysts at investment advisory firm TICLGL of Dar es Salaam.
Aimed at stimulating growth while tightening compliance, the Act introduces targeted incentives and new levies that promise both opportunity and disruption.
In short, TICGL fiscal and financial experts say that the new budget law aims to grow the economy and increase tax revenue through incentives and digital reforms, but caution that rising costs and investor concerns could slow its benefits.
Agriculture gets a boost
Agriculture, contributing over 25% of GDP, stands to benefit significantly. A three-year VAT exemption on locally produced fertilizers is expected to cut producer costs, potentially boosting output by 10–15% and raising agricultural GDP by TSh7 trillion.
This means, a fertilizer company with TSh10 billion in revenue could save TSh1.8 billion annually.
Further, all cashew export levy revenues will now go directly to the Tanzania Cashewnut Board for four years, aimed at improving processing and exports. With cashew exports valued at TSh570 billion last year, the sector could see an annual earnings rise of TSh114 billion.
Industrial incentives
Local manufacturing also gains. VAT exemptions on cotton-based textiles and 75% customs relief on capital goods could reduce input costs and drive reinvestment.
A textile firm earning TSh10 billion could save TSh1.8 billion through VAT relief, while TSh1 billion in machinery imports now attract TSh187.5 million less in duties.
Excise duty changes on imports such as preserved vegetables also aim to shield local producers. Analysts project these moves could inject TSh725 billion into GDP through expanded industrial activity.
Expanding the tax net
The Act targets Tanzania’s vast informal sector – about 30% of economic output – by mandating electronic tax systems and easing presumptive tax rules.
Formalizing just 10% of informal businesses (worth TSh5.4 trillion) could net TSh62 billion annually.
Additional levies – a TSh10 per litre fuel charge and a 0.1% AIDS levy on mineral sales – could bring in over TSh100 billion yearly. These measures support the domestic revenue goal of TSh44 trillion.
Financial Sector Reforms
Amendments empowering the Deposit Insurance Board and enhancing central bank independence are expected to stabilize the financial system and attract more foreign direct investment (FDI).
A 10% increase in FDI, which reached TSh3.4 trillion in 2023, could generate TSh340 billion in new capital.
But the Act also brings rising costs. A TSh22,000 per tonne carbon tax on coal and gas may squeeze manufacturers. A cement factory emitting 100,000 tonnes annually would face TSh2.2 billion in new taxes, potentially pushing construction costs up by 10%.
Excise hikes on telecom services (from 17% to 17.5%) and pay-TV could burden both providers and consumers. A telecom firm with TSh100 billion in revenue could face an extra TSh500 million in tax, with higher prices likely reducing usage – and sector revenue – by up to TSh500 billion.
SME and consumer impact
SMEs may struggle with compliance costs tied to digital tax systems. A small retailer earning TSh50 million might need to invest TSh1–2 million to comply – cutting into already narrow margins.
Consumers also face rising costs, with tax hikes on fuel, telecoms, and rail. A 10% rise in telecom prices, for example, could reduce subscriptions by 5%, impacting VAT collections.
With household consumption making up 60% of GDP, weaker consumer demand poses a risk to growth.
Foreign investment concerns
New restrictions on foreign participation in some sectors may deter investment. A 10% drop in FDI could reduce capital inflows by TSh340 billion annually, affecting infrastructure and job creation.
“The Finance Act, 2025, is a bold and necessary step,” states the TICLGL’s analysts. “But its success depends on how well the government manages rising costs, investor sentiment, and SME compliance burdens.” If effectively implemented, the Act could help Tanzania hit its 5.5% growth target and reinforce long-term resilience. But the balance between reform and risk will define its real impact.
