A New Study Reveals Tanzania’s Agricultural Sector Contributes Significantly More to Revenue Than Previously Thought

DODOMA, Tanzania – August 8, 2025

Tanzania’s agriculture sector has long been considered the backbone of the economy—but a groundbreaking new study reveals it may also be the country’s unsung fiscal powerhouse.

Unveiled at the 11th Annual Agricultural Policy Conference, the study, titled “Agricultural Reforms to Enhance Competitiveness”, was conducted by Cyril Chimilla of the Institute of Tax Administration and John Siegfried M. Shilinde of the Economic and Social Research Foundation (ESRF). Their research dismantles long-standing assumptions about agriculture’s fiscal footprint, arguing that official statistics severely understate the sector’s real contribution to government revenue.

A Hidden Giant: The True Fiscal Impact of Agriculture

While the sector directly generated TZS 214.4 billion in taxes in FY 2023/24—primarily through export levies—its indirect contributions far exceeded those figures:

• TZS 433.3 billion in simulated fuel taxes related to agricultural transport and logistics
• TZS 172.6 billion in produce cess collected by local government authorities (2021/22)
• TZS 38 billion in revenue from agriculture-linked service sectors
• TZS 55.7 billion in regulatory fees collected by various ministries across crops, livestock, fisheries, and aquaculture

“Focusing solely on direct tax collection grossly undermines agriculture’s value to the national treasury,” Chimilla emphasized. “When you consider indirect contributions, the sector is a sleeping fiscal giant.”

Indeed, in some agricultural LGAs, produce cess alone accounts for up to 90% of local government revenues.

Recommendations to Unlock Agricultural Tax Potential

The researchers call for a bold fiscal transformation to both reduce production costs and unlock the sector’s full tax potential. Their proposed reforms are forward-looking, growth-oriented, and grounded in both macroeconomic prudence and grassroots realities.

Key Recommendations:

1. Introduce targeted tax incentives—including slashing corporate tax from 30% to 10%—for new investments in agro-processing to stimulate value addition.
2. Reduce withholding tax on agricultural incomes from 2% to 1%, making room for higher farmer margins and long-term reinvestment.
3. Gradually cut produce cess to 1%, increasing farm profitability and boosting rural investment.
4. Incentivize formalization through tax credits, reduced rates for new businesses, and simplified digital registration and compliance platforms.
5. Invest in enabling infrastructure: modern irrigation, storage and warehouse facilities, fishing ports, and farm-to-market roads.
6. Digitize the entire agricultural tax system, from registration to payment, to bring smallholder farmers into the formal economy without bureaucratic burden.
7. Strengthen coordination among ministries and regulatory agencies to eliminate duplicative levies and fees.

Why This Matters Now

With over 65% of Tanzanians working in agriculture, these reforms have implications far beyond fiscal policy—they represent a lifeline for rural prosperity, food security, and inclusive industrialization.

Despite years of reforms—including ASDP I & II, tax exemptions, and fiscal blueprints—agriculture’s low value addition and informality continue to constrain growth. The study argues this is not just a productivity challenge but a structural taxation problem.

The proposed reforms align closely with Tanzania’s Third Five-Year Development Plan (FYDP III), and offer a powerful pathway to meet the country’s goals in economic transformation and human development.