Environmental Taxes (Carbon Taxes, Plastic Levies)

Environmental taxes are fiscal measures intended to promote environmental protection. In Tanzania, explicit “green taxes” are limited, but there are various fees and levies related to environmental policy. Tanzania has generally favored regulatory bans (like on plastics) and fuel levies over formal carbon taxation. Still, investors should note existing charges on certain activities and emerging trends as environmental consciousness grows.

Fuel Taxes (Implicit Carbon Tax)

Tanzania does not have a direct carbon tax on fossil fuel emissions. However, it heavily taxes fuels through excise and levies, partly serving environmental aims:

• Fuel Excise Duty: Petrol (gasoline) and diesel attract excise duty per litre (e.g., TZS 339/litre on petrol, TZS 255/litre on diesel as of 2024​. These raise fuel prices, indirectly discouraging excessive use and emissions.
• Fuel Levy (Road Maintenance Levy): A specific levy of TZS 263 per litre on petrol and diesel is imposed (adjusted periodically) to fund road repairs. This is not explicitly an environmental tax but increases fossil fuel cost. There’s also the Fuel Excise which when combined with the Road Levy, means Tanzanians pay substantial tax per litre (often 40-50% of pump price).
• Kerosene: Kerosene has historically been taxed lower to support low-income households, but to prevent adulteration with diesel, taxes were raised. Currently, illuminating kerosene has an excise of TZS 465/litre.
• These fuel taxes can be seen as a proxy carbon tax, as they internalize some external costs of fuel use (pollution, road wear). The effective carbon price via fuel tax in Tanzania, while not calculated, exists through these channels.

Motor Vehicle Taxes for Environmental Reasons

Tanzania imposes extra excise duty on older vehicles to discourage import of high-polluting, less efficient cars:

• Vehicles older than 8 years attract an additional excise tax on import: e.g., 15% excise for 8-10 year old used vehicles, and *30% for those over 10 years old​. This is atop the normal import duty and VAT. This steep tax on older cars (plus a 25% import duty) significantly raises their cost, aiming to reduce the influx of very old vehicles that are often less fuel-efficient and more polluting.
• Motorcycles older than 3 years face 10% excise. Newer vehicles have zero or lower excise (except luxury cars by engine size).
• Additionally, cars with larger engines have higher excise: e.g., 5% on 1000-2000cc, 10% on >2000cc (graduated). Larger engines generally mean more fuel consumption, so this also nudges consumers toward efficient cars. These measures serve environmental purposes (reduced emissions, lower fuel use) as well as revenue.

Plastic Bags and Plastic Products

Tanzania in June 2019 implemented a nationwide ban on plastic carrier bags. Rather than a levy, it’s a straight ban: the manufacture, import, sale, and use of thin plastic bags is prohibited. Travelers arriving in Tanzania are warned to avoid bringing plastic bags. This ban has environmental motivation (to reduce plastic pollution).

• There was an excise duty of 50% on imported plastic bags prior to the bags, and excise on locally made plastic packaging (50% excise). Those excise duties still technically exist on “disposable plastic bags” for any allowed uses (some specialized plastics). Effectively, plastic carrier bags are not taxed because they are banned, but other plastic packaging might still incur excise. The law lists “disposable plastic bags” at 50% excise, which is a punitive rate, reinforcing the environmental stance.
• Some plastic substitutes like single-use paper packaging might be zero-rated or lower duty to encourage shift.

Apart from bags, Tanzania is considering measures on other plastics (like extended producer responsibility for plastic bottles, though not yet in tax form). Currently, beverage companies pay a regulatory fee for plastic bottle waste management, but not a formal tax.

Environmental Levies/Fund Contributions

• Forestry and Charcoal Levy: There is a forest produce cess (3-5% on timber/charcoal as noted in section 6​, which partly disincentivizes deforestation by adding cost and partly raises revenue for replanting.
• Wildlife Conservation Fees: Tourism companies pay various fees (park fees, hunting block fees) which are not taxes but serve conservation funding. For instance, a bed-night levy in tourist hotels in some districts is earmarked for local environment/wildlife projects.
• Marine pollution levy: Ships calling at Tanzanian ports pay fees for waste reception facilities. Not a tax per se, but a cost to manage pollution.
• There is an Environmental Management Act requiring certain industries to pay into an environmental rehabilitation fund (e.g., mining companies must post reclamation bonds and sometimes contribute to an environmental trust).

Carbon Credit Framework

Tanzania has abundant forests and land for carbon sequestration projects. Recognizing this, Tanzania issued regulations for the trade of carbon credits:

• Environmental Management (Control of Carbon Trading) Regulations, 2022 were enacted. They establish a framework for approving carbon offset projects and ensure the government gets a share of proceeds (likely a royalty or fee on carbon credits).
• As mentioned in WHT section, *payments for carbon emission reductions (carbon credits) to Tanzanian project owners have a 10% withholding tax​. That indicates government’s aim to tax this new “green commodity.”
• Over $20 billion in potential carbon credit investments have been announce​, so Tanzania is positioning to benefit financially while incentivizing conservation. Though not a “carbon tax” on emitters, Tanzania may earn revenue by facilitating offsets.

Future Outlook – Potential Carbon Tax?

While no carbon tax exists yet, Tanzania is vulnerable to climate change and may face pressure to reduce emissions (e.g., from deforestation, transport). The REPOA review (2024) noted the option of environmental fiscal reform​. Possibilities:

• A carbon levy on fossil fuel producers/importers measured per ton CO2. Given current heavy fuel taxes, any separate carbon tax might merge with those or replace some portion.
• Incentive taxes: e.g., lower taxes on renewable energy equipment (already solar panels are VAT-exempted) and possibly future tax credits for renewable energy projects.
• Congestion/Emission charges in city centers: Dar es Salaam might consider a congestion charge or higher parking fees to cut traffic emissions in the future.

For now, environmental taxation is mostly via:

• High fuel taxation,
• Import penalties on old vehicles,
• Bans and excises on plastics,
• Use of WHT and fees for emerging markets like carbon credits,
• Product-specific levies (e.g., forest produce).

Investors in sectors with environmental impact (mining, manufacturing with waste, etc.) should anticipate increasing regulatory costs. While not labelled taxes, compliance might require paying into environmental funds or investing in pollution control (which could have tax incentives – e.g., capital allowances for pollution control equipment are available at 50% like other plant).

 Example:

A mining company might not pay a “carbon tax,” but it faces:

• a requirement to reforest areas (cost to company),
• a need to buy fuel for generators (fuel tax),
• it might decide to generate solar power on-site (which is incentivized by zero VAT on solar panel and exemption from fuel levy by using less diesel).
• If it sells carbon credits from preserving a forest around the mine, 10% WHT applied.

Another example: A logistics company replacing part of its fleet with electric vehicles finds no direct EV purchase subsidy, but it does avoid fuel taxes and also avoids the higher import excise on large engine vehicles. Government might in future reduce import duties on EVs to encourage adoption (as of now EVs are rare, but some proposals in EAC to lower EV duties exist).

Plastic Packaging Regulations:

In 2021, Tanzania introduced regulations requiring producers of plastic bottles to participate in collection/recycling (through a take-back scheme), potentially adding compliance costs akin to a product stewardship fee. Not a tax, but relevant environmental cost internalization.

Conclusion

Tanzania’s approach to environmental taxation is currently more regulatory (bans, standards) and through existing excise structures rather than standalone environmental taxes. However, the effective taxation of environmentally harmful activities is present (fuel, old vehicles, plastics). For an investor, it’s critical to:

• Monitor environmental regulations (as they can impose costs or require changes in process).
• Factor in high fuel and transport costs due to fuel levies when planning operations.
• Leverage any incentives for green investments (like tax exemptions for renewable energy equipment or duty remissions for clean technology).
• Comply with environmental laws to avoid fines (which can be steep under the EMA 2004).

As climate change concerns rise, Tanzania may in coming years implement more explicit green taxes or strengthen the ones that exist. For instance, a formal carbon tax on large emitters (power plants, cement factories) could emerge in a decade. Also, if Tanzania moves up from LDC, access to some foreign green funds may change, prompting domestic resource mobilization for environment via taxes.

For now, understanding the proxy environmental taxes (fuel excise, etc.) and regulations (plastic ban) is essential. These not only fulfill policy goals but also shape the cost and strategy for businesses operating in Tanzania.

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