Tanzania’s Tax Incentives Spark Debate: Economic Growth vs. Revenue Loss
Tanzania faces a critical economic challenge as tax incentives for foreign investors potentially undermine national revenue collection. Recent government data reveals that despite having approximately 4.7 million registered taxpayers—representing just 16 percent of the labor force—significant financial losses continue through investment incentive programs.
Experts warn that the country loses an estimated 4.79 trillion Tanzanian shillings annually through illicit financial flows, directly impacting national development and citizens’ access to essential services like healthcare, education, and infrastructure.
Export Processing Zones (EPZs) have become a focal point of controversy. While designed to attract foreign investment, these zones offer extensive tax breaks including:
– Tax holidays
– Customs duty exemptions
– VAT waivers on raw materials
– Unrestricted profit repatriation
Economic analysts argue that these incentives often result in minimal local economic benefit. Many investors operate temporarily, transfer profits internationally, and provide predominantly low-skilled employment without meaningful technology transfer.
The government defends these policies, asserting that competitive global investment requires attractive incentive frameworks. Tanzania Investment Centre reports a significant increase in registered projects, rising from 207 in 2020 to 901 in 2024, valued at approximately 2 trillion Tanzanian shillings.
However, economists recommend comprehensive reforms to prevent potential tax evasion and ensure long-term, sustainable economic development. The ongoing debate highlights the delicate balance between attracting foreign investment and protecting national economic interests.
