- Basic data
- Public finances and the state budget
- Banking system
- Tax System
After the death of President Magufuli and under the leadership of President Samia Suluha Hassan, Tanzania finally took measures against covid and focused on realizing economic growth and development. The tourism industry, which used to be the country’s main source of income, will continue to feel the impact of the COVID 19 pandemic for a long time, however, in the third quarter of 2021, the numbers are more optimistic, with 243,565 visitors arriving in the country compared to 74,534 visitors in 2020.
According to cheeroutdoor.com, the Tanzanian economy is dependent on agriculture, which contributes less to the creation of GDP by almost one quarter and employs about 65% of the workforce. Gold production has increased in recent years and accounts for nearly 35% of Tanzania’s exports. The government therefore maintains a presence in sectors such as telecommunications, banking, energy and mining. Tanzania’s main export partners are India, South Africa, Kenya, Switzerland, Belgium, the Democratic Republic of the Congo and China. Major export commodities include gold, tobacco, cloves, coffee, cashew nuts and cotton. Tanzania’s main import partners are India, China, United Arab Emirates, Saudi Arabia, South Africa, Japan and Switzerland. Major imported commodities include consumer goods, machinery and equipment, transportation equipment, and petroleum.
|GDP growth (%)||7||1.9||5||5.2||6.2|
|Export of goods (billion USD)||5||5.8||6.8||7.2||7.2|
|Import of goods (billion USD)||9.5||8.2||10||11.1||11.6|
|Trade Balance (Billion USD)||-3.3||-1.5||-3.3||-3.9||-4.3|
|Industrial production (% change)||ON||ON||ON||ON||ON|
|OECD export risk||06.VII||06.VII||06.VII||ON||ON|
Source: EIU, OECD, IMD
Public finance and state budget
|State budget balance (% of GDP)||-1.9|
|Public debt (% of GDP)||41.1|
|Current account balance (billion USD)||-2.4|
After the death of President Magufuli and under the leadership of President Samia Suluha Hassan, Tanzania finally took measures against covid and focused on realizing economic growth and development. In recent years, the percentage of the population in poverty has decreased from 28.6% to 26.3% in 2020. The strained relations with the International Monetary Fund (IMF), which prevailed under President Magufuli, have finally improved, and in November 2021, the IMF agreed to aid Tanzania in the amount of $37million to combat the effects of the COVID pandemic.
In the following period, economic growth will increase, which will be driven mainly by the growth of mining production and investments in public infrastructure. Projects financed by the loan include the construction of the Rufiji Hydropower Project dam and the construction of a railway between Tanzania and Rwanda and an oil pipeline between Uganda and Tanzania.
The President of Tanzania is actively working to break down trade barriers between East African countries, especially neighboring Kenya and Uganda.
Tanzania began financial liberalization in 1992 with the aim of increasing economic growth by promoting resource mobilization, encouraging competition in the financial market, and increasing the quality and efficiency of credit allocation. These reforms changed the direction and quality of financial services offered in the country. New merchant and commercial banks, exchange offices, insurance companies, stock exchange and related financial institutions were established. The entry of new banks and non-bank financial institutions increased competition and improved the quality and type of financial products and services provided. There are currently more than 20 registered banks and 9 non-banking financial institutions in Tanzania. Each of these institutions plays an important role in mobilizing financial resources. Within Tanzania’s financial sector, there are 40 commercial banks, 3 development banks, 2 microfinance banks, 7 MNOs (Mobile Banking Network Operators), approximately 100 microfinance institutions. MNOs are key players in Tanzania’s financial sector.
Banks play a key role in deposit holding, lending and corporate banking. MNOs dominate the field of payments between the population, their activity is limited to operating a mobile money transfer system, while they do not function as deposit holders. The banking sector is dominated by two former state banks, CRDB and NMB, which hold approximately 35% of total banking assets and 40% of deposits. The five largest banks then hold more than 50% of total banking assets. This effectively makes Tanzania’s banking sector an oligopoly. Central Bank: The Bank of Tanzania (BOT) is responsible for setting favorable monetary conditions that keep inflation low and stable over time. As stated in the Central Bank Act (BOT Act of 1995),
Tanzania derives most of its tax revenue from income taxes and value added tax. Tanzania has a residency-based tax system, whereby residents are taxed on their worldwide income, while non-residents are taxed only on their Tanzanian income.
Income tax of FO residents, 9 – 30%
A person resident in Tanzania is subject to tax on their worldwide income. A short-term non-resident is only liable to tax on income from Tanzania or income from employment or services provided in Tanzania.
Taxable Income – Income includes income from employment, profits from the exercise of a trade, business or profession; capital gains; dividends; interest; and non-monetary benefits, advantages or facilities obtained through earnings.
PO Income Tax Standard Corporate Rate – 30%
Newly listed companies on the Dar es Salaam Stock Exchange – 25%
Newly established companies producing pharmaceutical or leather products -20%
Companies with newly established vehicle and boat assembly plants -20%
Companies involved in the production of sanitary equipment -25%
Value Added Tax – 18%
Zero-rated goods and services include specified imported goods and services, used mainly in agriculture, health and education. These include, for example, animal feed, irrigation works, sprinklers, finished pipes and insurance or insurance contracts for agriculture.
Public finances in Tanzania are and will remain in deficit for the next two years. For this reason, a reduction in tax rates cannot be expected. On the contrary, the tax authorities will, under pressure from the government, increase the success rate in tax collection, which is low in Tanzania due to the widespread gray economy and does not cover a significant part of economic activities.