Parliament opens finance bill hearings as Sh1.72tr tax shake-up goes to public test

Tanzania's Finance Bill 2026 is currently undergoing statutory public hearings, marking a critical phase in the legislative process for a sweeping tax shake-up projected to raise an additional Sh1.72 trillion in revenue. The proposed reforms target key sectors including agriculture, digital services, and gambling, aiming to broaden the tax base and enhance compliance. Significant amendments include a new withholding tax on agricultural transactions, increased income tax rates for non-resident digital service providers, and new excise duties on gambling activities. The bill also introduces measures to mandate electronic payments for certain transactions and revises income tax thresholds and rates for small businesses. These changes, set to take effect from July 1, 2026, will profoundly impact businesses and individuals across the Tanzanian economy.

The United Republic of Tanzania is on the cusp of a significant overhaul of its tax landscape with the ongoing statutory public hearings for the Finance Bill 2026. Convened by the Parliamentary Standing Committee on Budget, these hearings represent a crucial stage of formal parliamentary scrutiny, inviting diverse stakeholders to contribute their views on the proposed legislation. This public engagement is mandated by Rule 100(2) of the Standing Rules of Parliament 2025, underscoring the importance of transparency and inclusivity in the law-making process for such impactful financial legislation.

At the heart of the Finance Bill 2026 is an ambitious plan to generate an additional Sh1.72 trillion in revenue, expanding the tax base into previously less formalised or emerging sectors. The proposed reforms are far-reaching, touching upon agriculture, digital services, gambling, and transport, among others. If approved and assented to, the Bill is slated to take effect on July 1, 2026, fundamentally reshaping taxation policy, compliance systems, and overall revenue mobilisation efforts across the nation.

This article delves into the key provisions of the Finance Bill 2026, examining its potential legal implications for various sectors and offering insights for legal practitioners navigating this evolving regulatory environment. It will explore the statutory context, analyse the specific tax measures, and conclude with practical considerations for businesses and legal professionals.

Tanzania's fiscal policy is primarily driven by its annual budget cycle, wherein the Finance Bill plays a pivotal role in enacting the government's revenue proposals. Each year, the Minister for Finance presents the national budget speech, outlining fiscal priorities and proposed tax measures, which are then formalised through the Finance Bill. The legislative process involves several stages, including scrutiny by parliamentary committees and public hearings, before the Bill is debated and passed by the National Assembly and subsequently assented to by the President.

The existing tax framework in Tanzania is primarily governed by several key statutes. These include the Income Tax Act, Cap 332 R.E. 2019, which provides for the charge, assessment, and collection of income tax; the Value Added Tax Act, Cap 148 R.E. 2019, which establishes the legal framework for the imposition and collection of VAT; and the Tax Administration Act, Cap 438 R.E. 2019, which consolidates provisions relating to tax administration and enforcement by the Tanzania Revenue Authority (TRA).

Recent years have seen continuous efforts by the Tanzanian government to reform its tax system, as evidenced by previous legislative changes such as the Finance Act 2025. These reforms often aim to broaden the tax base, improve compliance, and align with evolving economic realities, including the digital economy. The Parliamentary Standing Committee on Budget, responsible for scrutinising budget estimates and proposals, plays a critical oversight role in this ongoing process, ensuring public participation and legislative accountability.

The Finance Bill 2026 introduces a series of significant tax reforms designed to expand revenue collection and formalise various economic activities. One of the most impactful proposals is the introduction of a one percent withholding tax on agricultural transactions involving crops, livestock, fish, and unprocessed dairy products. While producers will be allowed to offset this tax against their annual tax liabilities, the measure has raised concerns among some stakeholders regarding potential cost pressures on small-scale producers. This move is explicitly aimed at formalising the agricultural sector, a critical component of Tanzania's economy.

In the rapidly growing digital economy, the Bill proposes to increase the income tax rate on payments made to non-resident digital service providers from two percent to three percent. Furthermore, it mandates non-resident online service providers to register locally, file returns, and remit taxes on services supplied to Tanzanian consumers, even without a physical presence in the country. This aligns Tanzania's digital services taxation framework with regional trends, as seen in Kenya and Uganda, and expands the scope of excise duty to cover business-to-consumer (B2C) excisable services provided by non-resident suppliers through online platforms.

Other notable amendments include the introduction of a five percent excise duty on various gambling activities, such as sports betting, casinos, slot machines, and online platforms, reflecting an effort to widen taxation in the fast-growing gaming industry. The Bill also empowers the Minister for Finance to prescribe payments that must be made electronically, making proof of electronic payment mandatory for transactions involving land, buildings, and motor vehicles. This is a significant step towards strengthening tax compliance and reducing cash-based transactions.

Income tax amendments are also substantial. The Bill proposes a reduction in the deemed retained earnings threshold from 30 percent to 15 percent, though this reduced rate will not apply to certain entities like small financial institutions, insurance companies, DSE-listed companies, and mining companies operating under Framework Agreements. The presumptive tax turnover ceiling is set to increase from Sh100 million to Sh200 million, with corresponding tax rates rising from 3.5 percent to 4.5 percent. Additionally, newly registered presumptive taxpayers will benefit from a one-year tax holiday, an incentive aimed at encouraging business registration and formalisation.

For the mining sector, the Bill proposes amendments to the Income Tax Act to formally recognise tax exemptions granted under Framework Agreements between the Government and mining investors. This aims to bolster investor confidence by ensuring that fiscal commitments made under approved investment agreements are honoured. In terms of tax administration, a welcome proposal is the requirement for Value Added Tax (VAT) refund claims to be paid within 30 days from the date of application, with interest accruing on any refunds not settled within this period. This addresses persistent delays in VAT refund settlements. However, challenges persist in the efficiency and reliability of digital tax collection systems, as highlighted by lawmakers in Zanzibar, who have called for improvements to address frequent service disruptions.

The Finance Bill 2026 represents a pivotal moment for Tanzania's fiscal policy, signalling a determined push towards enhanced domestic revenue mobilisation and the formalisation of key economic sectors. The proposed reforms, if enacted, will significantly alter the tax obligations and compliance landscape for businesses and individuals, particularly those operating in agriculture, digital services, gambling, and real estate. The projected Sh1.72 trillion in additional revenue underscores the government's commitment to self-reliance and funding national development priorities.

For legal practitioners, the impending changes necessitate a proactive approach. Advising clients will require a deep understanding of the new withholding tax regimes, expanded digital service taxation, revised income tax thresholds, and mandatory electronic payment requirements. Businesses, especially those in the affected sectors, must review their operational structures, financial reporting, and compliance mechanisms to adapt to the new legal framework. As the Bill progresses through its final legislative stages, practitioners should closely monitor the parliamentary debates, any further amendments, and the subsequent issuance of subsidiary regulations, which will provide crucial details for implementation. Engagement with the ongoing public consultation process remains vital for shaping the final contours of this transformative legislation.