TRA: Tax evasion costs Tanzania 1.3 percent of GDP

Dar es Salaam. Tax evasion in Tanzania accounts for 1.3 percent of the country’s Gross Domestic Product (GDP), the Tanzania Revenue Authority (TRA) revealed on Friday, August 22, 2025.

The taxman warned that offenders will face legal consequences as the agency intensifies its crackdown by establishing special facilitation desks nationwide.

TRA Commissioner General Yusuph Mwenda made the remarks during a high-level consultative meeting with private sector leaders in Dar es Salaam, where discussions focused on enhancing compliance and identifying sustainable measures to close revenue gaps.

He said Tanzania’s tax-to-GDP ratio is 13.7 percent, below the Sub-Saharan Africa average of 15 percent, indicating substantial revenue lost to tax evasion.

“We discussed various ways in which we can support the growth of businesses. On the customer side, we will enhance systems to make it easier for businesses to operate profitably and pay the correct taxes. There will also be campaigns to raise awareness and encourage compliance,” he told journalists during a briefing.

According to him, TRA’s strategy is to broaden the tax base by formalising informal businesses and introducing trade desks to guide operators.

“This approach will reduce the overall tax burden, enabling a gradual decrease in rates,” Mr Mwenda added.

Mr Mwenda noted that most tax evasion cases involve businesses that fail to issue receipts or underreport sales, with some deliberately manipulating records to reduce liabilities. He said enforcement will initially target large companies.

“A significant number of culprits are in the manufacturing sector, especially producers of energy drinks and alcoholic beverages. Some have already been identified, penalised, or are facing legal action,” he insisted.

He warned that such practices distort fair competition: “Those who pay taxes cannot compete with those who evade them. This is why we urge the Tanzania Private Sector Foundation (TPSF) to strengthen awareness among its members and promote voluntary compliance.”

To address the challenge, Mr Mwenda said TRA has set up facilitation desks across the country to provide taxpayer education and assist businesses in understanding their obligations.

“Our doors are open. Any business facing operational challenges is welcome to come forward. We are here to listen and support those who wish to engage in lawful economic activities,” stressed Mr Mwenda.

He emphasised that the crackdown will begin with large taxpayers but will cover businesses of all sizes.

“The fight against tax evasion is not about nationality. Anyone, local or foreign, who breaks the law will face the full force of the system,” he said.

TPSF Executive Director Mr Raphael Maganga said over 100 companies attended the meeting, which focused on the 2024 Finance Act’s impact and ways businesses could support revenue mobilisation.

He revealed that just 871 companies contribute 40 percent of all tax revenue, which he described as an unfair burden, and urged broadening the tax base to ensure fairness and sustainability.

“Many businesses are still in their early stages of growth, but we all have a role to play if we are to achieve this year’s revenue target of Sh36 trillion,” he said.

He added that agriculture and education were sectors that contribute significantly to GDP and employment, accounting for just one percent of tax revenue.

He urged the use of technology to increase collections from underperforming sectors.