It’s a pro-production budget

Presenting the estimates in Parliament, Finance minister Mwigulu Nchemba outlined key strategies to align the national development agenda with the East African Community’s regional framework. “The overarching theme of the 2025/26 Budget, as agreed by member states of the East African Community, is: ‘Inclusive Economic Transformation through Enhanced Domestic Revenue Mobilisation, Strategic Investment for Job Creation, and Improved Livelihoods for Citizens’,” Dr Nchemba said.

He reaffirmed the government's commitment to maintaining a stable and predictable tax regime that supports productivity and investment across key sectors. These include industry, minerals, agriculture, livestock, fisheries, energy, transport and logistics, alongside critical social sectors such as education and health.

Relief for farmers

Among the major beneficiaries of the budget are farmers, who will receive various tax exemptions aimed at easing production costs. The government is exempting VAT on agrochemicals to make pesticides more affordable, while a zero percent VAT rate will apply for one year on garments manufactured locally using domestically grown cotton. Locally-produced fertiliser will also be zero-rated for a period of three years, with Dr Nchemba stating that these measures are designed to cushion both farmers and consumers in the face of global economic volatility.

Additionally, the VAT exemption on locally-produced edible oil made from domestically grown seeds—which had been due to expire at the end of June 2025 under the Finance Act, 2024—has been extended for another year. The government is also removing VAT on a range of agricultural tools and equipment, including tractor tyres, dam liners, forks, rakes, and axes.

Boost for livestock, fisheries sectors

The livestock and fisheries sector is also set for major transformation in the 2025/26 financial year, with a series of reforms aimed at lowering costs, easing regulatory burdens, and spurring sectoral growth.

Dr Mwigulu Nchemba said in the Parliament that the changes form part of the government’s implementation of the Blueprint for Regulatory Reforms to improve the business environment and stimulate economic activity.

The government has proposed reductions in the permit fees for transporting livestock through border markets. The fee per cow will drop from Sh31,000 to Sh30,000, while the fee for goats and sheep will decrease from Sh7,000 to Sh6,500.

“These changes are designed to ease the burden on livestock keepers and make cross-border trade more accessible,” Dr Nchemba told Parliament.

Significant changes were also announced in the fisheries sector. The import fee on fin fish—excluding Tilapia—will be slashed from $2.5 per kilogramme to Sh1,300. The government says the measure is aimed at increasing the supply of fish for domestic consumption while supporting raw material needs for the country’s fish processing factories.

“The purpose of this move is to stimulate fish importation for food consumption and to boost raw material supply to fish processing factories in the country,” Dr Nchemba said.

These fiscal changes are expected to take effect from July 1, 2025, subject to legislative approval.

Dr Nchemba expressed confidence that the proposed fiscal reforms would not only improve productivity but also create jobs and enhance export earnings.

“The budget is not just about numbers—it’s about removing barriers and creating real opportunities for Tanzanians,” he said.

Clean cooking push

In support of the clean energy transition, the government has proposed the removal of VAT on natural gas sold to Compressed Natural Gas (CNG) stations for use in motor vehicles. Dr Nchemba said this measure is intended to stimulate investment in CNG infrastructure, promote the use of environmentally friendly fuels, and reduce reliance on petroleum products. He further announced that VAT will also be exempted on cooking gas tanks and cylinders, as well as on carbon capture equipment used in producing alternative charcoal.

“These measures are aimed at lowering acquisition costs and encouraging widespread adoption of clean cooking energy solutions across the country,” said the Minister. However, he noted that these exemptions are expected to reduce government revenue by Sh1.91 billion.

To offset some of these revenue losses while addressing environmental concerns, the government is introducing a new excise duty of Sh22,000 per tonne on carbon emissions resulting from the use of coal and natural gas. The measure is anticipated to generate Sh374.15 billion in government revenue.

In a related move, excise duty will be removed on un-denatured ethyl alcohol used in non-alcoholic applications such as food flavouring. This step is intended to lower production costs and boost the competitiveness of local industries.

Dr Nchemba also reported that preparations for the implementation of the Liquefied Natural Gas (LNG) processing project are ongoing. Exploration and development of oil and gas resources continue in key strategic blocks, including Songo Songo West, Mnazi Bay North, Eyasi-Wembere, and Blocks 4/1B and 4/1C. In addition, the government is pressing ahead with efforts to expand natural gas distribution to institutions, industries and households, as well as promoting the use of CNG in vehicles.

He further noted that all regions have now been connected to the National Power Grid, marking a significant milestone in the country’s energy infrastructure development.

Small-scale transport operators are also set to benefit from major tax reliefs proposed in the budget. Dr Nchemba announced plans to amend the Income Tax Act, Cap 332, to introduce a simplified tax assessment framework for motorcycles, three-wheelers (commonly known as bajaji), and light commercial vehicles with a payload not exceeding 500 kilogrammes, including guta (motorised tricycles).

Under the proposed framework, passenger vehicles carrying up to five people will be taxed at Sh120,000 annually, while those carrying between six and 15 passengers will pay Sh250,000. Light goods vehicles with a capacity of up to 500 kilogrammes will also be taxed at Sh120,000, whereas those with a capacity between 500 kilogrammes and one tonne will be taxed at Sh250,000.

Dr Nchemba also announced the abolition of the current presumptive taxes on motorcycles and bajaji, which currently stand at Sh65,000 and Sh120,000 respectively.

Relief for small-scale transporters

As part of efforts to further ease the burden on small-scale transporters, the government will amend the Road Traffic (Motor Vehicles Registration) Regulations, 2024, to cut the commercial motorcycle registration fee from Sh340,000 to Sh170,000, payable once every three years. The annual presumptive tax will be scrapped and replaced with a one-time payment of Sh120,000—down from the current Sh290,000. Meanwhile, licence fees for motorcycles and tricycles will be reduced from Sh70,000 to Sh30,000.

New plan to finance universal health insurance, HIV/AIDS

Meanwhile, the government has unveiled a sweeping revenue mobilisation strategy to finance Tanzania’s universal health insurance scheme and the national response to HIV/AIDS amid waning foreign support.

Dr Nchemba told the Parliament that the reforms were necessary to fill a significant financing gap triggered by global policy shifts that have led to major aid reductions, particularly in the health sector.

To compensate for the shortfall, the government will amend various laws to introduce a range of taxes and levies, targeting both traditional and emerging sectors. Among the key measures is an increase in excise duty on alcoholic beverages, which will see beer attracting a Sh20 levy per litre, wine Sh30 per litre, and spirits Sh50 per litre. The changes will apply to both locally produced and imported alcoholic drinks.

In addition, excise duty on electronic communication services will be raised from 17 to 17.5 percent, signalling the government’s intent to tap into Tanzania’s growing digital economy. A new fuel levy of Sh10 per litre will also be imposed on petrol, diesel, and kerosene through amendments to the Road and Fuel Tolls Act.

Dr Nchemba further revealed plans to amend the Mining Act to introduce a levy of 0.1 percent on the market value of all minerals produced in the country. The gaming sector is not spared, with withholding tax on winnings from sports betting set to rise from 10 to 15 percent, while winnings from land-based casinos will be taxed at 15 percent, up from 12 percent.

Vehicle and ticket levies
Vehicle importers will also face new charges. A Sh50,000 levy will apply to cars with engine capacities up to 1000cc, while those between 1001cc and 1500cc will pay Sh100,000. Cars between 1501cc and 2500cc will attract Sh150,000, and vehicles exceeding 2500cc will be taxed Sh200,000. Heavy machinery such as bulldozers, excavators and forklifts will incur a flat charge of Sh250,000.

New ticket levies have also been proposed, with passengers paying Sh500 per train ticket and Sh1,000 per air travel ticket. Dr Nchemba said the proposed measures are part of a broader domestic revenue mobilisation agenda designed to sustain essential public health services in the face of declining donor funding.

New tax burden

The budget also seeks to scrap the 10-year income tax exemption currently granted to investors in Export Processing Zones (EPZs) and Special Economic Zones (SEZs) when goods or services produced within these zones are sold in the domestic market. The government will repeal the legal provisions that allow such exemptions. This move, aimed at rationalising tax expenditures and safeguarding public revenues, is expected to generate Sh75.94 billion.

In the extractive sector, the government will reduce the amount of losses from previous years that can be carried forward and deducted in future income tax calculations—from the current 70 percent to 60 percent. The objective, according to Dr Nchemba, is to enable earlier revenue collection from mining, petroleum, and gas activities, and is projected to raise Sh123.6 billion.

Moreover, the Alternative Minimum Tax (AMT) rate on companies incurring losses for three consecutive years will be doubled from 0.5 to 1 percent.

The government also plans to impose income tax at a rate of 3.5 percent on the sale of forest products. The tax will be collected in a single instalment per consignment, and is expected to raise Sh111.6 billion while enhancing formalisation and sustainability in the forestry sub-sector.

Discouraging imports
In a bid to promote local industries and reduce dependency on imports, the government has proposed several measures to discourage importation. Licensing fees of Sh300,000 for manufacturers and importers of excisable goods will be removed to lower the cost of doing business. Additionally, excise duty on locally manufactured energy drinks will be significantly reduced from Sh561 to Sh134.2 per litre to support domestic producers.

Imported ice cream and similar edible ices will attract a new 10 percent excise duty, while locally manufactured versions will be taxed at 5 percent. Imported sausages and similar products will attract 10 percent excise duty, and their locally made counterparts 5 percent. Dr Nchemba explained that these measures are designed not only to boost local industry but also to address public health concerns. The government expects to collect over Sh119 billion from the ice cream duty alone.

Excise duty will also be introduced on imported soap (10 percent), margarine (Sh500 per kilogramme), and imported furniture (raised from 20 to 25 percent). These changes aim to protect local manufacturing and generate billions in additional revenue.

Providers of money transfer and payment services who use systems outside of financial or telecom networks will now be subject to a 10 percent excise duty. This is expected to bring in Sh220 billion and ensure tax fairness across platforms.

The government will introduce a suite of industrial development levies: 10 percent on imported bars and rods, 5 percent on nails and staples, 10 percent on imported furniture, 15 percent on flat-rolled products, and 10 percent on glass.

Imported ceramic tiles will be subject to a 10 percent levy or Sh4,500 per kilogramme—whichever is higher. However, cement clinker will be exempt from the levy to support non-integrated cement producers.

For the first time, goods originating from East African Community partner states and meeting EAC Rules of Origin will be included in the industrial development levy, in a move meant to bolster local manufacturers and ensure regional trade equity. Dr Nchemba said revenue from these levies would be directed towards the development of industrial parks across the country.

Relief measures to lower cost of doing business
To improve the business environment, the government proposes reducing the service levy rate from a variable ceiling of 0.3 percent of gross revenue to a flat 0.25 percent. This reform, aligned with the Blueprint for Regulatory Reforms, is intended to address inconsistencies in local government charges. Additionally, the hotel levy will be slashed from 10 to 2 percent, and local government loading and offloading fees related to goods transportation will be scrapped altogether.

The government also unveiled a bold package of investment and business reforms.

Dr Nchemba said the reforms encompass regulatory reviews, fiscal incentives, and institutional changes to unlock private sector potential and stimulate industrial growth.

He said the government has reviewed 12 investment-related laws and abolished or reduced 383 fees, levies and penalties. He said the Second Business Environment Improvement Programme has been prepared to facilitate investment, expand formalisation, and increase access to global markets for Tanzanian products.

To encourage capital formation, the government has proposed amendments to the Investment and Special Economic Zones Act of 2024. Among the key changes is a 75 percent customs duty waiver on non-indigenous capital goods for registered investors.

However, a ‘negative list’ will be introduced to exclude goods such as sugar, beverages, cement, and iron sheets from the incentive. The aim, according to Dr Nchemba, is to safeguard local industries, jobs, and tax revenues.

Dr Nchemba also announced the signing of four Public-Private Partnership (PPP) contracts valued at Sh681.53 billion to support the expansion of the Bus Rapid Transit (BRT) project in Dar es Salaam.

He said the government will continue to promote PPPs to reduce the fiscal burden and enhance service delivery efficiency.

More costs for visitors
However, the tourism sector may feel the pinch. Dr Nchemba proposed an amendment to the Insurance Act, introducing a mandatory travel insurance scheme for foreigners entering Tanzania—modelled after Zanzibar’s system. The insurance, set at $44 per visitor, would cover health emergencies, repatriation, accidents, baggage issues and theft, and apply for up to 92 days. Citizens of EAC and SADC member states will be exempt. The scheme will be administered jointly by the government and the National Insurance Corporation in partnership with the private sector.