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A budget that recognises current economic realities

“Don't tell me what you value; show me your budget, and I'll tell you what you value.” These are the words of President Joe Biden’s father, which if oft quoted by the president. When it comes to fiscal policy, no words can be truer. For governments, a budget is an expression of its priorities and aspirations. No matter what the government says, only what gets budgeted gets done.

On 14 June 2022, Minister Mwigulu Nchemba presented the national budget, with some interesting proposals. It was a window into not only the priorities of the government, but also how the government intends to execute those priorities. For me, there are three key issues that stood out with respect to this year’s budget.

Firstly, this is a budget that appreciates the current realities and the country’s economy. Tanzania is in the midst of a recovery effort. The COVID-19 pandemic had a slowing effect, albeit mildly compared to neighbouring countries, on the economy. Sectors that are particularly labour intensive, such as tourism and manufacturing, suffered decline. In addition to this, it is no secret that the Russia-Ukraine war has had a global impact with some of our European trading partners facing some serious inflationary pressures. In addition to that, there are looming inflationary pressures from the rise fuel prices .


Against that background, it was refreshing to see the Minister acknowledge the above realities. There were no increases in tax rates from a corporate tax perspective, and an actual reduction on mobile levies for the coming year. The country’s biggest telecommunication company, Vodacom, was very likely impacted by last year’s levy, having processed transactions worth more than TZS 60 trillion, a decline of 11% compared to previous year. The move to reduce the levy by more than 40% signals acknowledgment of our current reality.

It is also clear that there is a realisation that some austerity measures need to be taken by the government. It was particularly inspirational to see the Minister reflect on the almost half a trillion-shilling cost that the government currently spend on fuel and vehicle maintenance. The Minister indicated the advent of more online meetings to ensure no unnecessary spending from a fuel or vehicle maintenance perspective.


Secondly, this year’s budget has been quite agriculture-intensive. The Russian-Ukraine war has laid bare the state of our food imports. But Tanzania has always been a country that prized agriculture as the largest employment generating sector. It is quite historic that the Ministry of Agriculture’s budget has been more than tripled. The Ministry of Agriculture would like to see the sector grow by 10% (from the current growth of 3% annually) year on year until 2030. This growth is likely to put a serious dent on poverty rates.

Related to agriculture, some proposed changes included VAT exemptions on equipment used for soil testing, agro-nets used for horticulture activities, moisture equipment used for weather forecasting, refrigerated trucks and cold rooms for perishable products and standing trees. The diary and meat industry will also receive a boost because of a VAT exemption on producers of ultra-high temperature milk and yoghurt, dairy packaging materials, as well as machines and appliances used for identification of livestock. There is also a proposed exemption of crop cess on seeds as well as a reduction of produce cess on forestry products from 5% to 3%.

Thirdly, this year’s budget is the sustenance of the effort to expand the tax base. On this, there are two crucial changes proposed. One is the introduction of a 2% digital services tax by way of withholding tax. This is in line with regional and global trends of seeking to tax digital service providers. With the advent of technology, more and more activities will migrate digitally and it is only right that taxation accounts for that acceleration of the digital economy.

One remarkable proposed change is the requirement to ensure that every Tanzanian has a tax identification number. This will enable TRA to have more records on the taxpayers and ensure that ultimately everyone files a return and pays the tax accordingly. It should be noted that only 20% of tax collections come from the Domestic Department within TRA. In order to boost this contribution, more Tanzanians need to be captured in the tax paying net, and this is indeed a welcomed move.


Whilst there are a few missed opportunities, one can not help but appreciate that this is was a decent balanced budget given the times we are navigating as a country. Of course, execution is everything, and continued engagement with the private sector will bear fruit. But in terms of a statement of intention, few businesses will be disappointed.

Samwel Ndandala is a Senior Manager with Deloitte Consulting. He can be reached at sndandala@deloitte.co.tz. The views expressed herein are those of the author and do not necessarily represent the views of Deloitte.

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