DODOMA, Tanzania – A new study suggests that Tanzania’s agricultural sector contributes significantly more to government revenue than official statistics indicate. The research, conducted by economists Cyril Chimilla of the Institute of Tax Administration and John Siegfried M. Shilinde of the Economic and Social Research Foundation, highlights the substantial, often-overlooked, fiscal impact of indirect revenue.
Presented at the 11th Annual Agricultural Policy Conference, the study titled “Agricultural Reforms to Enhance Competitiveness,” found that agriculture directly generated TZS 214.4 billion in taxes in 2023/24, with a notable portion coming from export levies. However, the indirect contributions were far greater. The sector indirectly contributed TZS 433.3 billion in fuel taxes from agricultural transportation, TZS 172.6 billion in produce cess in 2021/22, and TZS 38 billion in revenues from linked service sectors. Additionally, Ministries collected TZS 55.7 billion in fees and charges on crops, livestock, fishing, and aquaculture.
The authors argue that focusing solely on direct contributions to taxes “grossly undermines” the sector’s true fiscal value. They point to a huge untapped potential for government revenue through increased value additions. To capitalize on this, the study recommends bold reforms, including:
- Special tax incentives for new agri-processing investments.
- Gradually reducing withholding tax and produce cess to 1% to improve farmer incomes and promote farm investments.
- Incentives for formalization and streamlined tax administration.
- Leveraging digital platforms for registration and payments.
- Targeted infrastructure upgrades such as roads, irrigation, and storage facilities.
The study concludes that lowering production costs, improving the business climate, and rewarding value addition will boost competitiveness and unlock the sector’s full revenue potential, paving the way for Tanzania’s development.