DODOMA: The government has unveiled an ambitious package of tax, financing and regulatory reforms aimed at unlocking the potential of entrepreneurs and the informal sector, as it seeks to stimulate business growth, create jobs and broaden economic participation under the 2026/27 Budget.
Prime Minister Dr Mwigulu Nchemba said the measures are designed to remove long-standing barriers that have constrained small businesses and encourage more Tanzanians to formalise their enterprises, expand production and contribute to national economic growth.
Addressing Parliament yesterday while adjourning the third meeting of the 13th Parliament, Dr Nchemba said the reforms form part of the government’s broader strategy to implement Vision 2050 by creating a business environment that rewards innovation, investment and entrepreneurship.
“The 2026/27 Budget creates an enabling environment for the formalisation of the informal sector, which employs the majority of our young people and women,” the Prime Minister told Members of Parliament.
Among the headline reforms is an increase in the proportion of internally generated revenue that Local Government Authorities must allocate to economic empowerment programmes.
Under the new arrangement, councils will set aside 15 per cent of their own-source revenue, up from the current 10 per cent.
Of the allocation, 10 per cent will continue to finance loans for women, youth and persons with disabilities, while the additional five per cent will be invested in markets, trading infrastructure and business centres aimed at creating more opportunities for entrepreneurs.
Dr Nchemba directed councils to ensure business areas are established in accessible locations where entrepreneurs can operate efficiently and grow their enterprises.
“Local authorities must allocate suitable business areas that are easily accessible. Where necessary, they should pay compensation to secure appropriate land so that entrepreneurs can conduct business productively instead of being driven from place to place,” he said.
The Prime Minister also ordered financial institutions and administrators responsible for managing council loan schemes to review lending conditions that continue to exclude many deserving entrepreneurs.
He cited stringent collateral requirements and compulsory group lending arrangements as unnecessary obstacles, particularly for persons with disabilities and small business owners.
“Remove the unnecessary conditions that prevent entrepreneurs from accessing these loans. Requirements that demand large collateral or compulsory groups deny many wananchi the opportunity to grow their businesses,” he said.
In another major incentive, newly registered small businesses will be exempt from income tax during their first year of operation.
Dr Nchemba said the measure is intended to give start-up enterprises sufficient time to establish themselves before assuming tax obligations.
“The government will grant newly registered small businesses a one-year income tax exemption from the date they obtain a Taxpayer Identification Number. This will allow them to strengthen their businesses before entering the tax system,” he said.
The tax relief is expected to benefit thousands of small-scale operators, including food vendors, motorcycle and tricycle operators, carpenters, welders, mechanics and other self-employed Tanzanians.
The Prime Minister said the incentive demonstrates the government’s commitment to encouraging business formalisation while protecting emerging enterprises during their early stages.
Beyond support for small businesses, the government has also introduced wider reforms to improve Tanzania’s investment climate.
Dr Nchemba said 55 laws have been reviewed, leading to the reduction or abolition of 374 fees and charges that had increased the cost of doing business and discouraged investment.
“These reforms are intended to reduce the cost of doing business, improve the investment climate and encourage more businesses to register and invest in Tanzania,” he said.
He added that the government is developing an integrated regulatory framework to address complaints over overlapping fees, penalties and compliance requirements imposed by different regulatory authorities.
The reforms, he said, will improve coordination among institutions while maintaining effective regulation without imposing unnecessary costs on businesses.
Dr Nchemba also encouraged entrepreneurs to seize opportunities created by the new budget, particularly incentives targeting agriculture, manufacturing, value addition and other productive sectors.
“I urge Tanzanians to make full use of these tax incentives by investing in production rather than pursuing short-term gains. This is how we will expand employment opportunities, especially for young people,” he said.
He said the package of reforms reflects the government’s determination to build an inclusive economy in which small businesses and the informal sector play a greater role in driving investment, industrialisation and sustainable economic growth.
The Prime Minister expressed confidence that the measures will strengthen entrepreneurship, increase incomes and create thousands of new employment opportunities, reinforcing Tanzania’s long-term development agenda under Vision 2050.
