The Car Import Deal Tanzania Doesn’t Talk About: When Tax Becomes the Biggest Stakeholder

Tanzania doesn’t need a state-owned car company to “own” the automobile market. The tax structure already does something close to that quietly, legally, and with breathtaking efficiency.

At the port, an imported vehicle enters a pricing pipeline where public revenue is not an afterthought; it is the architecture. Import duty comes in early, excise duty follows (often in two separate forms for passenger cars), then VAT arrives at the end, calculated on a base that already includes the earlier taxes and levies. The Tanzania Revenue Authority’s own materials describe this logic plainly: VAT on imports is charged on the value of the imported goods together with customs and excise duties; other border charges form part of what is payable at import. 

The result is not “high taxes” in the abstract. The result is that the tax system can capture a share of value so large that it behaves like a silent co-investor in each imported car without taking any of the operational risk.

Let’s ground that with numbers using publicly stated statutory rates.

Take a passenger vehicle imported for home consumption with a CIF value of USD 10,000. Add the commonly applied import duty band of 25% used for many finished goods under the EAC tariff structure. Now place it in the most common category of the Tanzanian used-car market: a mid-engine car (say 1,001–2,000 cc) and not too new (say 8–10 years old). Under Tanzania’s published excise schedule, it attracts 5% excise on engine capacity and 15% excise on age for used passenger vehicles aged 8–10 years. Add the Railway Development Levy (2% of CIF) and the Customs Processing Fee (0.6% of FOB). Finish with VAT at 18%, which is payable on imports alongside customs/excise and is computed on a base that includes those charges. 

When you run the arithmetic in a straightforward cascading way (import duty first, excise applied after duty, VAT applied after duty + excise + levies), the total border tax burden for that USD 10,000 vehicle lands at roughly USD 8,000—about 80% of the car’s CIF value—before you even discuss registration, clearing service fees, shipping-related port costs, insurance, or repairs.

Push the same car into the older bracket (over 10 years), and Tanzania’s age-based excise jumps to 30% for used passenger cars. Under the same assumptions, the total statutory tax burden rises to roughly USD 10,200 on that USD 10,000 CIF vehicle, meaning taxes alone can reach about 102% of the car’s CIF value.

This is not an argument that the government “takes too much”. It’s an argument that the design is so potent that it can unintentionally shape the entire transport economy fleet quality, emissions, maintenance costs, logistics efficiency, and household mobility more than any industrial policy memo ever will.

That brings us to the point: if vehicles are productivity infrastructure (and they are), then the question is not whether to tax them. The question is whether the tax system should keep behaving like the biggest shareholder in every imported car or evolve into a smarter steering mechanism for national outcomes.

This is where comparisons help, not as superiority contests, but as policy mirrors.

In Rwanda, the tax regime has been used much more explicitly as a directional tool for fleet modernization and clean mobility. Rwanda’s Revenue Authority has communicated the extension of incentives, where electric and hybrid vehicles (and electric motorcycles) benefit from zero import duty. Policy briefs around the 2025/26 reforms emphasize that electric vehicles remain fully exempt from key taxes to promote their uptake. Rwanda still raises revenue; indeed, it has also reintroduced VAT for certain categories like hybrids, but it signals clearly what it wants the market to become. 

Mauritius provides a different lesson: not “tax less”, but “tax with finer instruments”. Its recent budget-oriented tax updates show vehicle duties differentiated by technology and performance, including explicit rules where electric cars with a power output of up to 180kW attract a 15% duty and those with a power output above 180kW attract a 25% duty, alongside a broader restructuring of registration-related charges. Whether one agrees with every rate, the underlying approach is notable: it tries to map taxation to policy intent (technology choice, efficiency, and fleet composition), not only to revenue certainty.

Tanzania already has elements of that logic; age-based excise is, in theory, a way to discourage old imports. The challenge is that when age excise sits inside a cascading stack topped by VAT, the system can drift from “discouraging old vehicles” into “making renewal structurally expensive”, especially for ordinary households and small businesses whose realistic choices sit in the used-car segment.

A sharper reform agenda, therefore, isn’t about weakening the state. It’s about upgrading the state’s toolkit.

Tanzania could keep revenue credibility while improving economic outcomes by rebalancing how the tax burden is distributed across the chain, reducing the compounding effect where taxes inflate the VAT base, shifting incentives toward newer, safer, more efficient vehicles, and designing clearer green-mobility incentives in the way Rwanda explicitly does. The prize is bigger than cheaper cars. The prize is a fleet that costs less to maintain, moves goods more efficiently, burns less fuel, emits less pollution, and supports productivity instead of quietly taxing it.

In a fast-growing economy, mobility is not a vanity purchase; it is the bloodstream of commerce. Tanzania’s tax regime has mastered collection at the border. The next win is to master direction so the system earns, yes, but also builds the Tanzania it is financing.