This document provides an overview of tax incentives in Tanzania, analyzing the legal framework and challenges. It discusses how Tanzania began providing tax incentives in the 1980s and 1990s to attract foreign investment after adopting economic liberalization policies. The key tax incentives include tax holidays, reductions in corporate income tax rates, capital allowances, and import duty exemptions. However, these incentives have resulted in significant losses of government revenue and have benefited some foreign firms more than domestic businesses. The document examines Tanzania's tax incentive laws and the roles of the Tanzania Investment Center and Tanzania Revenue Authority in administering incentives. It also briefly reviews Uganda's tax incentive policies and qualifications for incentives before concluding with a discussion of challenges facing Tanzania's

1. 1
UNIVERSITY OF DAR ES SALAAM
SCHOOL OF LAW
(FORMERLY FACULTY OF LAW)
AN OVERVIEW OF THE LEGAL FRAMEWORK ON TAX INCENTIVES IN
TANZANIA: AN ANALYSIS OF THE PROSPECTS AND CHALLENGES ON
THE INCENTIVES UNDER THE TANZANIA INVESTMENT CENTER
BY
GWAMAKA MWAIKUGILE
REGISTRATION NUMBER: 2013-06-01691
A GRADUATE EASSY SUBMITTED IN PARTIAL FULFILMENT OF THE
REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTERS OF
LAWS IN DISCPLINE OF TAXATION AT UNIVERSITY OF DAR ES SALAAM
SCHOOL OF LAW
2014

2. i
DECLARATION
I, GWAMAKA MWAIKUGILE do hereby declare that this dissertation is a product of
my own work and that it has not been presented to any other university for similar or
other degree awards.
I further confirm that I understand the College rules against Academic Dishonesty and
Plagiarism and state that the work covered by this declaration is my own and does not
contain any unacknowledged work from other sources.
GWAMAKA MWAIKUGILE,
SIGNATURE…………………………….
THIS………………………….DAY OF………………2014

3. ii
CERTIFICATION
The undersigned do hereby sign to certify to have read and recommends that this
Graduate Essay be accepted by the of University of Dar es salaam, School of law, being
a partial fulfillment of the requirement for the award of a Masters of law in discipline of
Taxation (L.L.M TAXATION).
Signed this………….day of……………..2014
PROF. F. D.A.M LUOGA
(SUPERVISOR)
Signed this………….day of……………..2014
MR. H. KITTA MLINGA
(ASSISTANT SUPERVISOR)

4. iii
COPYRIGHT
This work is a copyright protected under the Copyrights and Neighboring Rights Act,
Cap 218 R.E. 2002 and any other international instrument for the protection of
intellectual property rights.
Therefore, no part of this research paper may be reproduced, copied, adopted, abridged
or stored in any retrieval system or transmitted in any form by any means; electronic,
photocopying, recording or otherwise, save for the application of ‘fair use doctrine’
without prior written permission of the author or of the Dean, school of law, University
of Dar es salaam.
© University Dar es Salaam, School of Law 2014
© Gwamaka Mwaikugile

5. iv
ABSTRACT
Tax Incentive is a form of reduction or total exemption in taxes. They intend to stimulate
or increase investments to selected sectors of the economy. In developing countries tax
incentives ecommerce and other service industries1
. Due to the increase of challenges as
a major problem facing tax incentive in Tanzania, the writer has found it necessary to
conduct a critical analysis of Tax Incentive Legal Framework in Tanzania especially
under Tanzania Investment Act.
Part one of the essay gives an introductory aspect of the study, paving way to the
background of the graduate essay and Tax Incentive experience in selected countries of
this study. Part two of this essay contains a lengthy discussion on the concept of analysis
of Tax Incentive Legal Framework in Tanzania. This part is a presentation of the essay
findings and a detailed analysis on the laws, regulations, institutions (Executive
agencies) and challenges facing tax incentive in Tanzania.
Finally, this study at part three comes up with conclusive remarks, summing up on what
has been discussed in the preceding parts. The part finally poses some recommendations
as to what has to be done by the government, the other executive agencies or institution
at large so as to make sure that they curb the challenges facing Tax Incentive Legal
Framework in Tanzania.
1
Adam H. B. (1995) An Appraisal of Tax Incentive and their Management in Tanzania; Taxation Policy
in Tanzania: Constraints and Perspectives, 1st
edition, Workshop Report of the University Of Dar es
Salaam, Faculty of Law At Page 62

6. 1
TAX INCENTIVE IN TANZANIA
Introduction
The Government of Tanzania is providing Tax incentive to businesses so as to attract
greater level of foreign and local Investment into the country. This Graduate Essay
shows that such Tax incentives are leading to challenges on revenue losses in the
country.
The process of granting tax or fiscal incentives of different varieties has a long history,
but its main objective through-out the time has remained much the same, namely to
attract investors. In Tanzania, the government has always considered tax incentive as an
integral part of investment incentive package as to attract foreign direct investment. But
the problem is that these tax incentive have come under severe abuse in most emerging
economies like that of Tanzania, where incentive are widely put to personal use instead
of serving the broad public interest for which they are designated.
Tax incentives result in a loss of current and future tax revenue. Consequently, the
Tanzanian government is losing millions of shilling because of the Tax Incentive in tax
legal system. This is a great impediment since it creates the investments that benefit
from tax incentives while led to the economic problems to the poorest country like
Tanzania2
. For instance the government loosed Tanzania shillings two hundred and
ninety point seven billion because of the TIC incentive to investors in 2013 which is
2
Jonas. J. (2008) Kenya, Uganda and United Republic of Tanzania: Selected Issues; IMF Country Report
No. 08/353,

7. 2
19% of the all incentive granted by the government3
. And according to TRA report the
total amount of incentive granted in the year 2013/2014 is Tanzania shillings one point
four trillion.4
Tax incentives create differences in effective tax rates and thus distortions in allocation
of investment between activities that are subsidized and those that are not, Tax
incentives are hard to remove once granted, and could require large administrative
resources. Tax incentives could result in rent-seeking and other undesirable activities,
Income tax holidays could be a particularly ineffective way of promoting investment.
Companies that are not profitable in the early years of operation would not benefit from
income tax holidays. In contrast, such holidays would be of less importance to
companies that are profitable from the start of their operation, Tax incentives attract
mainly footloose firms; and Tax incentives can be outside the budget and non-
transparent5
.
What is Tax Incentive?
Tax Incentives have been defined as a deduction, exclusion or exemption from a tax
liability, offered as an enticement to engage in a specified activity such as investment in
capital goods for a certain period6
.
Tax incentives are a wider term that can take different forms such as Tax exemption,
3
The minister of State in the Prime Minister‟s Office (Investment and Empowerment), Dr Mary Nagu
speech at the parliament published by Mwananchi (Dar es Salaam) Tanzania: TIC gives tax incentive
about Tshs 290 billion publish on Wednesday Sharon Sauwa , 25th
June 2014, p4
4
The minister of State in the Prime Minister‟s Office (Investment and Empowerment), Dr Mary Nagu
speech at the parliament published, op cit
5
Jonas. J. (2008) Kenya, Uganda and United Republic of Tanzania: Selected Issues; IMF Country Report
No. 08/353
6
http;//www.businessdictionary.corn/definitions.htm.Accessed on 1st
May 2014

8. 3
Tax Concession, Tax holidays and Tax relief. The investment incentives are classified
into two major categories: Fiscal Incentives and Non-Fiscal Incentives, Fiscal form
include corporate income tax holidays and reductions in tax rates. Non tax incentives
include direct subsidies like government grants, loans and guarantees for target projects.
Tax incentives are granted to attract FDI and/or promote economic policies, such as to
encourage investment in certain sectors7
.
The investment incentives provided under the law are competitive and are aimed at or
accessible to investments in areas which are strategically considered being crucial for
the economic development of Tanzania. These sectors have included agriculture, agro-
based industries, mining, tourism, petroleum and gas and economic infrastructure (Road,
railways, air and sea transport, port facilities, telecommunication, banking & insurance8
.
The fiscal incentives which are sometimes referred to as tax incentives are mainly in the
form of enhanced capital deductions and tax allowances, which include investment
allowance on capital expenditure, infrastructure allowance on infrastructure expenditure,
preferential tax rates for withholding tax on dividends, royalties and interests,
preferential tax rates on personal income tax and indirect tax; and double deductions on
approved costs and expenses. Both local and foreign investors who are registered by
7
Mark C, Lucy K, James D.(2012) Tax Competition in East Africa a Race to the Bottom, Tax Incentives
and Revenue Losses in Tanzania;, Tax Justice Network-Africa & ActionAid International, p 21
8
Saudin J. M. (2014) Some Legal Perspectives on Investment Incentives; The citizen retrieved from
www.citizen.co.tz on 7th
July 2014, p 4.

9. 4
Tanzania Investment Centre (TIC) and/or Tanzania Revenue Authority (TRA) are
eligible for the tax incentives9
.
The rationale for granting of incentives are improving productivity and efficiency by
attracting Tax incentive act as a catalyst for industrial development, promoting the
transfer of proprietary knowledge and technology, also it creating employment
opportunities for the general public, giving the local human resources opportunity to be
trained and become skilled10
. In addition it implementing economic diversification and
protecting the economy from undue price movement and to creating opportunity for
accessing foreign markets and to encourage the location of industries in particulars areas
of the country11
.
The other consideration that leads to the introduction of tax incentives is tax
competition. Tax competition refers to situations where people manage their tax burdens
by shifting factors of production from high-tax jurisdictions to low-tax jurisdictions12
.
The ensuing fiscal rivalry leads to reduction of tax rates and encourages mobility of
capital and labour13
. Countries are then compelled to maintain a competitive tax system
in the increasingly globalized economy, with poor African countries principally relying
on tax holidays and import duty exemptions while the industrialized countries use
9
Ibid.
10
Moses K & Simon N (2012) Tax Exemptions; Implications on social development; SEATINI Uganda, p
21.
11
Ibid.
12
Mitchell D (2005): The Economics of Tax Competition: Harmonization vs. Liberalization, A briefing
paper by the Adam Smith Institute ,P 1-3
13
ibid

10. 5
investment allowances or accelerated depreciation14
.
Historical Background of Tax Incentive in Tanzania
Tax Incentive during Colonial Period
The history of Tax incentive can be traced back to the colonial times. It was at that time
where the first case of tax incentive was heard. Tanganyika now Tanzania under German
did imposed tax system, which was designed to provide the colonial administrator with
unfettered powers over the colonial subjects. It reflected the nature of the system of
governance of the colonial state in which the subjects had no rights in determining the
form of government and it‟s financing15
. During the British income tax legislation was
enacted in Kenya in 1937. The ordinance can best be described as a simplified synthesis
of U.K. tax legislation as it existed around 1920. With some amendments, this ordinance
remained in effect until 1950. In 1948, under the East African (High Commission)
Order-in-Council, the East Africa High Commission was created as a statutory
corporation to administer certain inter-territorial services in Kenya, Uganda, and
Tanganyika. The Order-in-Council set up a Central Legislative Assembly that contained
official and non-official representatives from the three constituent territories and was
14
Morissel .J .G .P (2000): How Tax Policy And Incentives Affect Foreign Direct Investment, A review,
56 URA (2010)
15
F D A M Luoga ( 2002) TaxationintheAdventof DemocratisationandTransitiontoFreeMarketEconomyinTanzania
and Concerns on the Rule of Law and Human Rights retrieved from
http://www2.warwick.ac.uk/fac/soc/law/elj/lgd/2002_1/luoga/

11. 6
empowered to legislate with respect to certain specified matters. Such legislation would,
when enacted, override the conflicting territorial legislation16
.
When High Commission legislation on income tax came to be enacted, it was necessary
to have one managing act (the East African Income Tax (Management) Act of 1952)
dealing, with respect to the whole of East Africa (excluding Zanzibar), with general
matters, leaving each territory to enact separate legislation dealing with rates and
allowances17
.
Tax Incentive after the Independent
During the early days of independence in 1961 there was no clear and elaborate
government policy on matters of investment in the country. The Government did not
make any significant changes in the contents of the Tax legal system. There were
growing feelings of anti- private property ownership advocated by the nationalists who
by then were led by the Tanganyika African National Union (TANU). Thereafter, the
government realized that there was a need for investors due to the fact that the economy
was still in the formative stages.18
Although, it is notable that the Income Tax Act no 33
of 1973 enacted and then it was repealed and amended by Income tax Act no 332 of
2004.
After Arusha Declaration Period
16
Aspatore (2010) Tax Law Client Strategies in the Middle East and Africa: 1st printing, Thompson,
retrieved from www.west.thomson.com.
17
Ibid.
18
Peter.C.M & Saudin. J. M (2004), Investment in Tanzania: Some comments-some issues, Dar es
Salaam: Mbagala Spiritual Centre. at p.8.

12. 7
As for Tanzania, the tax incentive laws was introduced in 1980‟s and 1990‟s, due to the
great economic change in East Africa that caused by the adoption of the economic
liberalization policies whereby the government intended to use the private sector as main
engine of economic development19
. Due to the pressure from World Bank and the
International Monetary fund (IMF) after the collapse of the Soviet Union, which was
one of the major external economic pillars of Tanzania since Independence, the
Government had no option than to comply with the standards set by the setters of the
economy. Henceforth attracting Foreign Direct Investment inflows in Tanzania set out
Investments Authority. An Investment policy was put in place in 1990 when the
Government enacted the National Investment Promotion and Protection Act (NIPPA)
1990, which granted tax incentives to investors in the form of tax holidays for a specific
period of time.
Tax Incentive after Liberalization Period
In 1997 NIPPA was repealed and replaced by the Tanzania Investment Act No 26 of
1997 that is now operational20
. The Act established the Tanzania Investment Centre, an
investor is entitled to a number of fiscal incentives to help a venture get off the ground.
These include the granting of a Certificate of Incentives, Strategic Investor Status and an
Import Duty Draw Back Scheme which, as a package, provide tax relief as well as
preferential treatment by authorities and lending institutions. The Tanzania Investment
19
Flavianus M. (2012) Determinants of foreign direct investments (FDI‟S) IN East Africa countries of
Tanzania and Kenya: Mzumbe University retrived from http://www.clknet.or.tz/
20
Tanzania Investment Guide 2013 – 2014 by Tanzania Investment Center retrieved from www.tic.go.tz
on 12th
May 2014

13. 8
Act (TIA) 1997 which guaranteed incentives to investors who are registered by the
Tanzania Investment Center (TIC) as shown in section 19 of the Tanzania Investment
Act.21
Tax Incentive Experience in Selected Countries
Uganda
The Government enacted the Investment Act, 1991 (CAP 92 of the Laws of Uganda)
with the principal objective of providing more favorable conditions for local and foreign
investors. The Uganda Investment Authority was established as the agency to administer
that Investment Code Act22
.
The desired qualifications to benefit from the provisions of the Act, the intended
business/investment must met the requirement as provided by section 12 of the Act that
generation of new earnings or savings of foreign exchange through exports, resource
based import substitution or service activities, The utilization of local raw materials,
supplies and services; The provision of section 12(c) provide that the investor must
creation of employment opportunities in Uganda and in section 12 (d) the act provides
that the investor must introduce advanced technology in Uganda and the contribution to
locally or regionally balanced social-economic development; or Any other objectives the
Authority would consider relevant to the attainment of the objectives of the Investment
Act.
Section 21 provides for the exemptions from the imports and sales tax for the qualifying
22
Section 2 of the Act, 1991(CAP.92)

14. 9
companies, that have been granted with investment licences and other reliefs benefit
such as import duty and VAT exemption on plant and machinery, equipment, vehicles
and construction materials for an investment project.
Investors would benefit from „First Arrival Privileges” in the form of duty exemption for
personal effects and one motor vehicle owned for at least 12 month before arrival in
Uganda23
.
Most holders of the Investment Licences were entitled to a five year tax holiday. They
however had the obligation of submitting tax returns to the Uganda Revenue Authority
for purposes of ensuring that proper computation of capital deductions and investment
allowances were made in accordance with the Income Tax Act, 1997. It is worth noting
that under this regime, the Minister responsible for Finance had a lot of discretionary
powers in granting of investment licenses and hence the enjoyment of tax exemptions.
The Uganda Investment Authority would grant the privileges and monitor compliance to
the tax provisions. This arrangement created a gap in information flow and partly
accounts for the lack of reliable and objective information which one can firmly base
onto determine whether the intended objectives of this tax exemption regime were met24
.
Kenya
The Government of Kenya is providing a wide range of tax incentives to businesses to
attract greater levels of Foreign Direct Investment (FDI) into the country. Tax incentives
23
Section 24 of the Uganda Investment Code Act,1991(CAP.92)
24
Moses K & Simon N (2012) op cit, p 13.

15. 10
are leading to very large revenue losses and are anyway not needed to attract FDI25
and
are provided under the Export Processing Zones Act of 199326
and the investment
promotion Act of 200427
.
The preamble of the Kenya of EPZ Act provide for the establishment of export
processing zones and Authority; that promote and facilitate export oriented investment
and the development of enabling environment for such investment and for connected
purpose28
.
Kenya provides an array of tax incentives. The more prominent ones concern the Export
Processing Zones, one-off capital investment deductions, exemptions given on
withholding tax and the zero rating of VAT payable for goods and services procured by
public bodies and privileged institutions.29
The statutory regimes that govern fiscal
incentives are the Income Tax Act30
, the Value Added Tax Act31
and Customs
legislation32
.
The EPZ in Kenya provides a 10-year corporate income tax holiday, followed by a 25%
rate (compared to the standard 30%) for the next 10 years and 10 year withholding tax
holiday on dividends and other remittances to non-resident parties (except for EPZ
commercial licence enterprises) and Perpetual exemption from VAT and customs import
25
Mark C, Lucy K, James D.(2012) Tax Competition in East Africa a race to the bottom, Tax Incentives
and Revenue Losses in Tanzania;, Tax Justice Network-Africa & ActionAid International, p 1.
26
CAP 517
27
CAP. 485B [Rev. 2009]
28
Chapter 517 of The Export Processing Zones Act 1993
29
Diarietou G, Catherine B. K.& others (2010) African Development Bank, Domestic Resource
Mobilisation for Poverty Reduction in East Africa: Kenya Case Study;, Regional Department East A
(OREA) p.30
30
Value Added Tax Act, Chapter 476 of the Laws of Kenya
31
Income Tax Act, Chapter 470 of the Laws of Kenya
32
The EACCMA, 2004, and the Customs & Excise (1st Booklet) Code, chapter 472 of the Laws of Kenya

16. 11
duty on inputs raw materials, machinery, office equipment, certain petroleum fuel for
boilers and generators, building materials, other supplies. VAT exemption also applies
on local purchases of goods and services supplied by companies in the Kenyan customs
territory or domestic market33
.
The preamble of the Kenya Investment promotion Act34
provide for promote and
facilitate investment by assisting investors in obtaining the licences necessary to invest
and by providing other assistance and incentives and for related purposes and section 14
of the Act provides for the establishment of the investment promotion centre, which is
body corporate under this Act to be known as the Kenya Investment Authority.
Section 15. (1) of the Act provides that the Authority shall promote and facilitate
investment in Kenya. In subsection (2) of section 15 provides that in promoting and
facilitating investment the Authority shall assisting in obtaining incentives or
exemptions under the Income Tax Act, the Customs and Excise Act, the Value Added
Tax Act or other legislation.
Overview of the Legal Framework for Tax Incentive through TIC
Introduction
As briefed in the previous part, this part covers an analysis on the tax incentive legal
framework under Tanzania Investment law in Tanzania. As well, it includes the findings
33
http://www.epzakenya.com/index.php/investment-information/incentives.html retrieved on 10th July
2014
34
CAP. 485B [Rev. 2009]

17. 12
as to whether the mechanism applied are effective or not, this is by looking on the role
played by the administrative body that is TIC. Therefore, this part presents a decisive
analysis and findings of the aforementioned enforcement and protection mechanisms.
Tax Incentive Framework in Tanzania
Introductory remark
The tax incentive laws under Tanzania law are regulated by the Tanzania Investment
Act. Chapter 38 [2002 Revised Edition] and Tanzania Investment Regulations
Government Notice No.381A OF 2002. The laws provide for the regulatory regimes of
the Incentives under the Tanzania Investment centre, which has been given power to
grants certificate of incentives and other tax relief or allowances.
Tanzania Investment Act. Chapter 38 [2002 Revised Edition]
Tax incentives in investments are regulated under, the Act embraces what was provided
in the investment policy with regard to investment incentives. The Tanzania Investment
Centre, the Authority under the Act grants Certificates of Incentives under authority
conferred upon it by Part III, Section 17 (1-8) of Act, 1997.
And for an investor to get the certificate of incentives, the business thereof must be
registered first with the TIC as provided for under section 17 of the Investment Act.
After registration then the investor is given the certificate of incentives which is having
also fiscal incentives. TIC grants a certificate of incentives to investors which provides
them with a package of tax incentives and other non-fiscal incentives. Section 17(7) of

18. 13
the Investment Act provides to the effect that a certificate of incentives shall not be
transferred, or amended without the approval of the Centre. So if there any amendment
or transfer of the certificate the same must be done with the approval of the centre.
In Section 19(1) of the Investment Act provides that, A business enterprise in respect of
which a certificate is granted under this Act shall be entitled to the benefits which are
applicable to that enterprise under the provisions of the Income Tax Act, the Customs
Tariff Act, the Value Added Tax Act, or of any other written law for the time being in
force. As seen above the Act provides a number of tax incentives to various investors
registered with TIC as per Section 19 (1) A business enterprise in respect of which a
certificate is granted under this Act shall be entitled to the benefits which are applicable
to that enterprise under the provisions of the Income Tax Act, 1973, the Customs Tariff
Act 1976, the Sales Tax Act, 1976, or of any other written law for the time being in
force. But this section has been amended by the Written law (Miscellaneous
Amendments) act no 5 of 2005, delete the whole section 19 (2) by substitute it with
another new subsection where the law provide “for the purpose of creating a predictable
investment climate, an investor to whom a certificate has been entitled to the benefits
referred to under subsection (1) shall not during period of 5 years for the date of
issuance of such certificate be amended or modified to the detriment of such investor35
.
35
Before 2005 Amendment: section 19(2) of the Tanzania Investment Act provides to the effect that the
tax incentives granted will not be amended to the detriment of an investor, and this is done so as to create
a predictable investment environment. Therefore provisions like these weaken the centre because it cannot
amend the certificate of incentives to create a win-win situation because the same can be blamed by
investors as being amended to their detriment because it was no provide any time limit for amendment:

19. 14
This provision prohibits the amendment or modify of the certificate of incentive to the
damage of the investor until lapse of five years.
Section 40 of the Finance Act of 2012 amend section 19 (3) of the Act substitute with
new subsection (3) where the provision limit the Application of section 19 (2) to motor
vehicle manufactured more than eight years before the importation and in section 19 (3)
(b) provides for a non utility motor vehicle exceeding 3000 car or cubic capacity of the
engine and Section 19 (4) provides for the exemptions granted to capital goods must
restricted to 90% where the investors must pay 10% of the Import duties.
Section 20.(I) For the purposes of promoting identified strategic or major investments,
the Minister, may, by order published in the Gazette, and after consultation with
appropriate government authorities and after consultation with the Minister of Finance,
specify specific in addition to the benefits provided under section 19 of this Act for any
period which the Board may specify. In subsection (2) Where the Ministers do not agree
on any issue or matter in accordance with the provisions subsection (1); the Minister
shall within one month from the date of the consultations referred to in subsection (1),
submit the matter to the President for consideration.
Tanzania Investment Regulations Government Notice No.381A OF 2002
The regulations, provides inter alia, for matters regarding Investment application and
registration under part IV of the Regulation and matters pertaining to requirements of
investors to file information. Regulation 45 provides to the effect that, pursuant to
section 19(2) of the investment Act, a business enterprise in respect of which a

20. 15
certificate is granted shall be entitled to enjoy benefits obtained under the Investment
Act and the applicable financial laws on the date of issue of the certificate, and the
benefits so enjoyed shall not be amended to his detriment by any subsequent legislation.
However, under regulation 52 of the Investment Regulations, the investor who is
registered under the Investment Act is required once in every six months to file
information to TIC in the prescribed form no TIC 3 which is found in the schedule to the
Regulations. And the information so filed must be in conformity with the terms of
registration. Nevertheless TIC cannot do anything if the investor will not comply with
the Regulation, or if the contents so filled in the form indicate the misuse of the
incentives. Regulation 53 goes further in showing the contents of the information to be
filed to the centre. The regulation states that: The information required in regulation 52
above shall contain: (a) a summary of the capital injection to meet the investment for
which a certificate of incentive was granted; (b) Shares issued to the members of the
business enterprise for cash; (c) Shares issued as fully or partly paid up otherwise than in
cash; and (d) An allotment return filed with the Registrar of Companies36
.
Despite the fact that Investment regulations have tried to control the investor through
filing of semi-annual returns but it has not given enormous powers to the centre
regarding what should be done if the required information have not been filed, or if the
summary of capital injection to meet the investment for which a certificate of incentive
was granted has not been met. The regulations do not give powers to TIC as to what
should be done if the investor will not comply with the requirements of Regulation 52.
36
Tanzania Investment Regulations Government Notice No.381A of 2002

21. 16
So the TIC still has no powers of regulating investment incentives which are given to
investors as the laws state clearly that once incentives have been granted cannot be
amended. TIC ought to have been given powers of overseeing those incentives as to
whether they are used as required or not.
Tanzania Investment Center
The Act (TIA) is the law set up the TIC, the same designed to creating a sound
regulatory framework for investment promotion and the administration of incentives37
.
Tanzania Investment Centre is established under section 4 of the Tanzania Investment
Act.38
And under subsection 2 of the same section TIC is referred to as an agency of the
government and is under the general supervision of the Minister responsible for
investment.39
TIC was established to be the Primary Agency of the Government to coordinate,
encourage, promote and facilitate investment40
. It is a one-stop facilitative centre with
officers from Ministry of Trade & Industry, Business Registration & Licensing
Authority (BRELA), Lands, Immigration, Labour and TRA stationed at the TIC41
.
TIC is an administrative institution aiming at granting Tax incentives to both local and
foreign investors provided they are registered by Tanzania Investment Centre (TIC)
37
Tanzania Investment Guide 2013 – 2014 Op.cit, p 76
38
Cap 38 [2002 Revised Edition]
39
This is seen when section 4 is read together with section 3 and 5 of the same Investment Act.
40
http://www.tic.co.tz retrieved on 10th
July 2014
41
Samuel J. Sitta (2005) Investment for African Development: Making It Happen: Tanzania Investment
Centre. Retrieved from www.tic.co.tz on 10th
June 2014.

22. 17
and/or Tanzania Revenue Authority (TRA). These incentives are granted to different
beneficiaries for various reasons; such as social, economical, political reasons or
international agreements (bilateral or multilateral). In some instances, tax exemptions or
tax concessions are granted as part of tax breaks to stimulate economic development for
example the tax exemptions provided to mining companies and tax incentives provided
to investors registered with the TIC.
The Procedures for Granting Certificate of Incentives:
Under TIC provides what are called Soft landing incentives to investors during
establishment period of their businesses in Tanzania. As an investment facilitator for
investors TIC liaise with different ministries and other government departments.
In addition, the TIC functions as a tool for creating awareness to both the investor local
or foreign and the public at large on matters concerning incentives. The mode of creating
awareness is through the media, production of pamphlets and books as well as the
different seminars, meetings and workshops it arranges and hosts42
.
In spite of the fact that TIC is dealing with investment matters but the Investment Act
does not give the centre enormous powers of regulating the fiscal incentives which the
centre itself has given to the investors. Even with the use of the Ejusdem generis rule43
in interpreting section 6 (h) of the Act, which gives the centre the power to perform any
other functions which are incidental to the attainment of the objectives of the Act does
42
Tanzania Investment Guide 2013 – 2014 opcit
43
that where general words follow an enumeration of persons or things, by words of a particular and
specific meaning, such general words are not to be construed in their widest extent, but are to be held as
applying only to persons or things of the same general kind or class as those specifically mentioned
retrieved from http://thelawdictionary.org/ on 10th
July 2014.

23. 18
not give TIC the power to regulate the fiscal incentives because section 5 of the Act does
not mention anything regarding control or regulation of incentives which are given to
investors rather it provide for the objectives of the TIC.
Challenges Relating to Tax Incentive in Tanzania
Introduction
Tax incentives defeat the spirit of taxation as to collect revenue for government
expenditure and to provide funds for to finance social demands. These can be used to
enhance public goods and services in the development and recurrent expenditure
budgets, for instance communication, infrastructure such as roads and bridges, and
social services such as health, education and water. In economic terms, the exemptions
are opportunity costs in that the exempted funds cannot at the same time be available to
fund development. It is not prudent therefore to depend so much on donor support while
at the same time taxes exempted taxes should be collected to finance the development
and recurrent budgets.
Challenges to the Government.
(a) Revenue losses: for instance Tanzania being one of Africa‟s largest gold producers, the
expectation has been that mining would contribute significantly to its economic
development. This expectation has not been fulfilled. The International Monetary Fund
(IMF) notes that gold exports have risen from around US$ 500 million to US$ 1.5
billion in the last five years due to rising gold prices, but that government revenues have
remained at around US$ 100 million per year. This is largely because of the corporate

24. 19
income tax holidays provided to mining companies44
. In fact, none of the existing gold
projects have paid material income tax to date the IMF note45
. Eg The Bomani
Commission estimated that the government lost T.Shs 39.8 billion in 2006/7 and T.Shs
59 billion in 2007/8 as a result of fuel levy exemptions granted to the six large mining
companies46
. As of late 2011, mining companies were making claims to the government
for refunds totaling US$ 274 million related to their fuel levy exemptions for the period
since 200247
.
(b) Adjusting incentive for holders of TIC certificates. For instance strategic investment,
such as Mlimani City, Kagera Sugar and Mtibwa Sugar. These investors entered into a
contract with the government on certain projects hence the government effects its terms
of the agreement inform of an exemption. Contracts are affected through the National
Investment Steering Committee established by the TIC.
The legal and policy framework
There is no guideline for granting incentive, which provides control how to
administer the same. The law and TIC cannot control or regulate the investor where
there is misuse of the said fiscal or tax incentives, it can just declare things which have
44
Saul L. & Dominique D.(2011) Staff Report for the Article IV consultation and second review under
support instrument; IMF Country Report No. 11/105, p 55.
45
Ibid.
46
Policy forum (2009) An Analysis of Tanzania‟s Budget Revenue Projections; How much Revenue are
we losing?‟ Tanzania budget; Policy Brief 3.09, p 2. Retrieved from http://www.policyforumtz.org on
10th
July 2014.
47
Davida. B. (2011) „TZ may abolish tax refund for miners to boost Revenue;25th
October 2011 retrieved
from www.bloomberg.com

25. 20
been done by the investor or any benefit which has been obtained under the certificate to
be void, and this will be done subject to the rights of third parties.
The regulations do not give powers to TIC as to what should be done if the investor will
not comply with the requirements of Regulation 52. So the TIC still has no powers of
regulating investment incentives which are given to investors as the laws state clearly
that once incentives have been granted cannot be amended. TIC ought to have been
given powers of overseeing those incentives as to whether they are used as required or
not.
Despite the fact that Investment regulations have tried to control the investor through
filing of semi-annual returns as per regulation 53, but it has not given enormous powers
to the centre regarding what should be done if the required information have not been
filed, or if the summary of capital injection to meet the investment for which a certificate
of incentive was granted has not been met.
The law failed to provide special provisions that can help the TRA to regulate tax
incentives which has been granted by TIC, that it to say TRA is left with the task of
overseeing those taxes, but it cannot amend the package granted.
Conclusion
As from the findings of this study, it has been observed that there are a lot of prospects
and challenges facing the Tanzania Investment centre, the laws and the government
because the issue is a measure of the government‟s commitment to national interest; at
the same time it is a measure of the government‟s commitment to promoting Tanzania as

26. 21
an investor friendly destination. The government fears to put strict control of Tax
investment incentives as it fears to disturb investors. In the next part of this essay some
recommendations are provided as to what is to be done so as to make sure that Tax
Incentive reflects the spirit of taxation.
Findings, Recommendation and Conclusion
Findings
The overview of the legal framework on tax incentives in Tanzania: an analysis of the
prospects and challenges on the incentives under the Tanzania investment centre
translate into the following main findings:
As seen in the preceding part of findings, that there is no strict control of the fiscal
investment incentives. But this has been caused by the present legal regime. The loose
control by the government of these fiscal investment incentives is used as a lucrative
lure to attract more investors in the country; however this makes the TRA to lose enough
revenue from the telecommunication sector. Conclusively, there should be a moderate
control of these incentives so that the government can benefit from the taxes which are
not paid to the government48
.
Recommendations
48
Khery Fredy Sanga (2012) Government Regulation of Investment Fiscal Incentive Packages in
Tanzania: A Critical Analysis of the Law and Practice in Telecommunication Industry Degree of Master
of Laws (L.L.M) In Commercial Laws of Mzumbe University (Unpublished), p 50.

27. 22
a) The law should be Amendment: The current investment laws which are the Tanzania
Investment Act no.26 and the Financial Laws (Miscellaneous Amendments) Act no.27
both of 1997 and written law (Miscellenous Amendments) act no 5 of 2005, which
delete the whole section 19 (2) by substitute it with another new subsection. There is a
need to amend the law so that it can meet the need of the purpose of taxation as to raise
revenue for public gain and fast changing investment environment in the country. For
instance section 19(2) of the Tanzania Investment Act as amended by Written law
(Miscellenous Amendments) Act49
provide “for the purpose of creating a predictable
investment climate, an investor to whom a certificate has been entitled to the benefits
referred to under subsection (1) shall not during period of 5 years for the date of
issuance of such certificate be amended or modified to the detriment of such investor”..
As shown in the preceding part the TIC which grants to investors the said fiscal
incentives it has no power or mandate of amending the same for the benefit of the
government until the lapse of five years from issuance of such incentive. For mining
companies, five years is enough to generate a lot of profit provides to the effect that the
tax incentives granted will not be amended to the detriment of an investor. Therefore
provisions like these weaken the centre because it cannot amend the certificate of
incentives to create a win-win situation and defeat the spirit of taxation as avoid to be
blamed by investors as being amended to their detriment. Also section 5 and 6 of the Act
have not mentioned the power of TIC to regulate fiscal investment incentives which
have been provided to investors. Therefore with the current laws it shows that once the
49
Act no 5 of 2005

28. 23
centre has given the incentives to the investor, the hands of the centre become tied, it can
longer control or regulate them in any way whatsoever. For instance Recently the
Government have intends to reduce tax exemptions50
.
b) Tax Incentive Level should be reduce: There is a need to reform a number of tax
incentive in order to diminish revenue losses and reduce the level of tax incentive in
Tanzania, ensuring relevant stakeholders are engage in developing proposed
interventions. This is possible through changes to the legal framework and
administrative practice underpinning the incentive. Former Finance Minister Mustafa
Mkulo said in budget speech that the government has already taken steps to review
procedures for tax exemptions to strengthen control over abuse and that government
policy was to review and harmonise various tax laws, which have provisions of
exemptions, with a view to minimize such exemptions. Government policy he said is to
reduce exemptions from their current level of 2.5 per cent of GDP in his estimate to at
least 1 per cent of GDP51
. As to avoid the increasing of low revenue collection and thus
weaken Government ability to finance social economic infrastructure and ultimately
reduces the pace of improving well being of our people. Tax exemptions have also
created loopholes for tax evasion and revenue leakage52
. There is great need to
undertake a review of all tax incentives with a view to reducing especially those that
50
The Government has a new Value Added Tax Bill which aim at minimise issuance of Value Added Tax
exemptions and remain with exemptions that are economically productive and spur socio-economic
development and ensure fairness. Also in the 2014 Finance Bill, this is waiting for the president assent.
This was the Minister for Finance Hon Saada S. ( Mp) Speech (2014) Introducing to the National
Assembly, the estimates of Government Revenue and Expenditure for Fiscal Year 2014/2015 retrieved
from www.mof.go.tz on 10th
July 2014

29. 24
involve the exercise of discretionary powers by Ministers and remain with those produce
economic beneficial to the public interest.
c) Transparency in Contracts Concerning Tax Incentive: All documents concerning tax
incentive given by government to foreign and local investors, religious institutions, non-
governmental organizations and public institutions should be mandatory required to
publicly declare with full details on how much they pay and receive in tax. The
government should also join the Extractive Industries Transparency Initiative (EITI),
which is intended to improve the transparency of investors, religious institutions, non-
governmental organizations and public institutions in payments of deducted amounts to
the government. It will enable the government and public in general to know what
amount is forgone due to tax concessions and what amount received.
d) Control of fiscal incentives: It has been stated that investors both local and foreign are
not angels; they are business persons who above all are motivated by the possibility of
making profit over and above that which could be made in a simple business transaction
at home. Therefore they would exploit each and every loop hole in the statute books to
ensure that they invest as little as possible, avoid paying taxes, pay low salaries as much
as the law can permit and so on.53
This makes the control of fiscal investment incentives
given to investors in the telecommunication sector be mandatory because in the present
case there is a real likelihood of these incentives being misused by investors. Even if the
51
Finance Minister, Budget Speech 2011/12, pp.11, 25, www.mof.go.tz
52
Finance Minister, Budget Speech 2009/2010, paras. 78, 71, www.mof.go.tz
53
Maina, P.C and Mwakaje, S.J. (2004), Op.cit at p.51

30. 25
law has not so provided, TIC should try as much as possible to regulate or control the
incentives which are granted to investors. It should be acting as a watch dog because it is
the one which grants therefore it must ensure that it controls what it has granted
e) Cooperation between TIC and TRA; In dealing with fiscal investment incentive which
are provided to investors in the telecommunication sector there must be a close
relationship between Tanzania investment Centre which grants those fiscal incentives to
an investor, also Tanzania Revenue Authority which deals with collection of tax so TRA
must closely monitor the taxes which are given and ensure that they are used as required.
Therefore it is recommended that there should be a close cooperation between TIC and
TRA.
Conclusion
After reviewing several studies on the subject, I came with conclusion that these tax
incentives are not an important factor in attracting foreign investment. Countries that
were most successful in attracting foreign investors did not have to offer tax or other
incentives, and vice versa, offering such incentives has not been sufficient to attract
large foreign investment if other conditions were not in place.
The main beneficiaries, of tax incentives in Tanzania remain a small group of foreign
investors, while the losers due to substantial revenue losses for the government are the
general population and the country as a whole54
.
54
Tax Justice Network-Africa & Action Aid International, “Tax Incentives and Revenue Losses in
Tanzania”, June 2012.

31. 26
As explained throughout the essay, conclusion is not in the affirmative because the law has
not given TIC strong powers of controlling or of regulating the fiscal investment
incentives which it has given to investors. And the same cannot be rectified to the
detriment of investors, so for that case it means it is possible to change the incentives but
to the detriment of the government55
.
55
See section 19(2) of the Tanzania Investment Act Cap 38 R.E 2002 as Amended by Act no 5 of 2005
which provides to the effect that for the purposes of creation a predictable investment climate, the benefits
referred to under subsection (1) shall not be amended or modified to the detriment of the investors
enjoying those benefits until lapse of five years

32. 27
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