Tanzanian govt unveils new tax measures to boost agriculture, local processing

Dodoma. The government has unveiled a comprehensive package of tax reforms aimed at stimulating agricultural productivity and enhancing value addition.

The measures—announced during the tabling of the 2025/26 national budget—include new VAT exemptions and adjustments to the Common External Tariff (CET)

Tabling the 2025/26 national budget in Parliament, the minister for Finance, Dr Mwigulu Nchemba, announced that VAT will now be exempted on pesticides, edible oil derived from locally grown seeds, and locally produced fertilisers.

The measure is designed to reduce production costs for farmers and agro-processors while improving access to essential agricultural inputs.

“These VAT exemptions are part of deliberate interventions to strengthen our agricultural sector and promote value addition using locally available raw materials,” Dr Nchemba said.

In addition to the VAT changes, several amendments have been made to the CET to promote local manufacturing and reduce dependency on imports.

Packaging materials for processed coffee, processed tea (for local blenders), and seeds used by domestic agricultural producers will now be zero-rated—from the previous 25 percent to 0 percent.

According to the Minister, the tariff cuts on packaging materials are intended to reduce production costs for coffee and tea processors, as well as to enhance the competitiveness of seed producers.

"The goal is to support local value chains and ensure affordability of inputs critical to agricultural transformation," he explained.

To further incentivise domestic value addition, raw materials used in the manufacture of different types of fertilisers have also been granted zero-rated CET status.

This is expected to stimulate growth in local fertiliser production and reduce reliance on imports.

In contrast, to encourage local processing of raw agricultural products, the government has increased CET on cocoa powder that does not contain added sugar or other sweeteners from 0 percent to 10 percent.

Dr Nchemba stated that the adjustment is aimed at promoting domestic processing of cocoa seeds, enhancing value addition, and generating more revenue for the government.

In support of the cotton-to-cloth (C2C) strategy, the tariff on cotton yarns has been raised from 10 percent to 25 percent.

“There is immense potential for cotton yarn production in the country. This change will bolster our textile industry and add value to domestically grown cotton,” said the Minister.

Furthermore, the government has moved to shield local farmers and horticultural businesses by increasing CET on horticultural products from 25 percent to 35 percent.

This measure is expected to protect local producers from cheap imports and create a more favourable market environment for domestically produced fruits, vegetables, and floriculture products.

To align the tax regime for all vegetable oils, the CET on crude vegetable oils derived from soybeans, groundnuts, coconuts, mustard, and linseed has been raised from 0 percent to 10 percent.

The revision aligns these oils with sunflower and cottonseed oils, which already attract a 10 percent tariff.

“These adjustments are crucial to ensuring a level playing field and encouraging investment in domestic oilseed crushing and refining,” Dr Nchemba said.

The raft of tax and tariff reforms underscores the government’s continued commitment to industrialisation and agricultural transformation as outlined in the country’s long-term development agenda.

Stakeholders across the agriculture and manufacturing sectors are expected to benefit through reduced input costs, improved market competitiveness, and enhanced capacity for value addition.