A word to the national tax and investment dialogue for the 2025/2026 budget preparations

[Respicius Mwijage]

Introduction

The National Tax and Investment Dialogue, scheduled to commence on 15th April 2025, presents a strategic opportunity for Tanzania to re-engineer its tax system, reinforce investor confidence, and cultivate a national tax culture anchored in equity, service orientation, and sustainable development. As the country prepares for the 2025/2026 national budget, this Dialogue must transcend routine consultation and become a policy-shaping forum that reflects both the economic aspirations of the country and the lived realities of taxpayers and investors.

Acknowledging the Taxpayers Gap

Her Excellency President Samia Suluhu Hassan has, on various occasions, emphasized the critical disconnect between Tanzania’s registered taxpayer population and the volume of economic activity and population size. This disparity signals a substantial challenge in revenue mobilization and tax administration, highlighting the need for an inclusive, deliberate, and reform-oriented national conversation on taxation and investment. The President’s observation is a timely call to action that must frame the spirit and content of the Dialogue.

Reimagining the Role of the Tanzania Revenue Authority (TRA)

The Tanzania Revenue Authority has made considerable strides in revenue collection over the years. However, the relationship between TRA and taxpayers remains strained, often perceived as adversarial rather than facilitative. A modern tax administration must view taxpayers as partners in development, not merely subjects of enforcement. TRA must be repositioned as a service-oriented institution, responsive to taxpayers’ needs and built on the values of integrity, professionalism, and transparency.

There is a pressing need to transform the organizational culture of TRA, particularly through:

• Institutionalizing regular stakeholder engagement platforms at all levels;
• Implementing service charters that guarantee accountability and predictability; and
• Introducing customer-centric key performance indicators to monitor service delivery across tax offices.

Strengthening Tax Dispute Resolution Mechanisms

Taxpayer confidence in the dispute resolution process is critical to voluntary compliance. However, the existing system has been undermined, conflicting appellate jurisprudence, and limited use of alternative dispute resolution mechanisms. To restore public trust and enhance legal certainty, the following immediate reforms should be considered:

• Amendments to the Tax Administration Act (Cap. 438) and the Tax Revenue Appeals Act (Cap. 408) to guide tax objection procedures, formally recognize and institutionalize mediation in tax disputes;
• Strengthening the capacity and independence of tax adjudicatory bodies including the Tax Revenue Appeals Board (TRAB) and Tax Revenue Appeals Tribunal (TRAT); and
• Establishing strict timelines for the disposal of tax appeals and promote transparency and jurisprudential consistency.

Expanding Taxpayer Education and Engagement

A significant portion of tax non-compliance, especially among informal businesses, stems not from deliberate evasion but from a lack of awareness. A comprehensive taxpayer education strategy is therefore essential to improving compliance. This strategy should:

• Extend beyond urban centers to cover rural and peri-urban populations;
• Employ simplified, multilingual, and digital content;
• Involve collaborative partnerships with local governments, professional associations, civil society organizations, and the private sector; and
• Integrate taxation modules into national entrepreneurship and financial literacy programs.

Enhancing Professionalism and Accountability within TRA

Reports of unprofessional conduct among some tax officers have contributed to negative perceptions of TRA. Addressing this requires a comprehensive human resource development strategy that includes:

• Mandatory customer care and ethics training during induction and through continuous professional development;
• Internal monitoring and evaluation systems that reward ethical behavior and penalize misconduct; and
• Transparent complaints and feedback mechanisms accessible to all taxpayers, including small and informal businesses.
• Enhancing Tax Ombudsman Service functions.

Transparency in Public Spending and the Link to Tax Morale

Voluntary compliance is directly influenced by the public’s perception of how tax revenues are utilized. A lack of transparency and accountability in public spending continues to erode tax morale. The government may:

• Ensure timely publication of revenue and expenditure reports by all Ministries, Departments, and Agencies (MDAs);
• Strengthen the role and independence of the Office of the Controller and Auditor General (CAG); and
• Establish visible connections between tax revenues and public service delivery, particularly in infrastructure, health, and education sectors.

Formalizing the Informal Sector through Incentives, Not Coercion

The informal sector constitutes a significant share of Tanzania’s economy yet remains largely untaxed. Rather than punitive enforcement, the government should adopt incentive-based formalization strategies. These include:

• Simplifying business registration and licensing processes;
• Offering tax holidays or concessional rates for first-time registrants;
• Linking formalization to access to credit, training, and social protection programs; and
• Utilizing data-driven approaches to identify and support informal businesses without disrupting livelihoods.

Rationalizing Tax Policy and Broadening the Tax Base

Tanzania’s tax system remains narrow, with a high burden falling on a small base of compliant taxpayers. To promote equity and economic efficiency, the Dialogue should advocate for:

• Comprehensive review and rationalization of existing tax rates and brackets;
• Gradual elimination of economically distortionary and regressive taxes;
• Systematic evaluation of tax exemptions and incentives to determine their return on investment; and
• Introduction of presumptive and sector-specific taxes that reflect ability to pay.

Improving Digital Tax Systems and Inter-Agency Integration

While digital systems such as Electronic Fiscal Devices (EFDs) and e-filing platforms have improved compliance, many users—particularly in remote areas—struggle with their complexity. TRA must prioritize:

• Enhancing the usability and accessibility of digital tax systems;
• Integrating tax data with other agencies such as NIDA, BRELA, and LGAs for seamless compliance; and
• Expanding mobile-based tax payment systems for traders and small businesses in underserved areas.

Conclusion

The National Tax and Investment Dialogue should not merely be a consultative exercise but a platform for transformative policy direction. The government, in partnership with the private sector, development partners, and civil society, must commit to:

• Reforming tax administration to prioritize service over enforcement;
• Ensuring fairness and predictability in tax dispute resolution;
• Investing in taxpayer education and customer care;
• Linking tax compliance to transparent and accountable public spending;
• Creating enabling conditions for the formalization of the informal sector; and
• Broadening the tax base through rationalized and equity-driven tax policy.

With these reforms, Tanzania can build a tax system that not only enhances domestic revenue mobilization but also fosters inclusive growth, supports sustainable investments, and strengthens citizen confidence in public institutions.

“Together we build our nation”