People have viewed the positive aspects of the 2026/27 budget differently. Some will point to the move towards a cash-lite economy, others to the heavy investment in infrastructure, while others will highlight the strong push for domestic revenue mobilisation and self-reliance, with about 74% of the budget expected to be financed internally. These are all lofty objectives. However, for me, the budget deserves applause for the tax incentives it has granted to promote electric vehicles (EVs) and gas-powered vehicles.
The incentives include lower import duties on EVs, VAT exemptions for charging and CNG infrastructure and tax exemptions for electric and gas-powered boda bodas. I wrote about this last month and my position was shaped by what we are currently experiencing as a result of the USA/Israel versus Iran war.
Despite these commendable steps, my view is that the incentives falls short of what is required to catalyse a rapid transition to EVs. The most significant limitation is that the reforms primarily focus on reducing taxes rather than actively subsidising the transition. Even with reduced import duties, EVs remain expensive compared to conventional internal combustion engine (ICE) vehicles, especially because the Tanzanian market is predominantly dominated by used car imports. For example, a 10-year-old 2000cc ICE Toyota RAV4 costs about TZS 40 million, while a used EV may cost anywhere between TZS 80 million and TZS 120 million.
Without direct purchase subsidies, scrappage schemes or concessional financing, EVs will remain out of reach for the majority of Tanzanians. In countries where EV adoption has accelerated, such as China and several European countries, governments have combined tax relief with upfront financial incentives that significantly reduce the purchase price gap.
Another gap is the absence of a financing and affordability framework. The budget does not introduce dedicated credit lines or low-interest loan facilities for EV and CNG purchases. This is a critical omission because, for a country like Tanzania, access to affordable financing often matters more than tax reductions. Without addressing liquidity constraints, adoption will remain limited to high-income earners.
Furthermore, the policy lacks a clear long-term transition roadmap. While the incentives encourage voluntary transition, there are no binding targets or phased restrictions on high-emission vehicle imports that would accelerate behavioural change. A structured timeline for reducing internal combustion engine vehicle imports, combined with the expansion of EV infrastructure nationwide, would have created stronger market certainty and investor confidence.
Infrastructure development, although supported through tax exemptions, still depends heavily on private sector investment. A more realistic approach would involve public-private investment in nationwide charging corridors and CNG stations, particularly along major transport corridors and in small towns. Also commendable is the directive that public institutions should consider the procurement of electric and gas-powered vehicles in their plans and fleets. The heads of these institutions should now walk the talk.
In conclusion, Tanzania’s 2026/27 budget tax incentives for electric and gas-powered vehicles are a positive and necessary first step towards greener mobility. However, to achieve meaningful transformation, the government needs to complement these incentives with direct subsidies, affordable financing mechanisms, stronger infrastructure investment and a clearer long-term transition roadmap.
