In Africa, tax and income generation systems are currently being created using the latest financial technologies. These systems are designed to solve one of the main problems faced by every developing country, how to formalize the «gray» economy.
According to the analytical materials of the African Union Development Agency, about 90% of the employed in sub-Saharan Africa work in the informal sector, from artisans to market traders. The share of the informal economy in the GDP of these countries can reach 36%. The main task for developing economies is to ensure revenue to the treasury from these activities. The transition to formal business arrangements will strengthen their finances, boost their credit ratings, and expand their ability to finance social services. The main focus is on the development of digital taxation and income accounting systems.
Tanzania, in particular, is committed to the full digitalization of the public revenue system. Finance Minister Khamis Moussa Omar presented a plan for 2026/27, which provides for the mandatory transition to digital payments in some industries, the expansion of the use of electronic fiscal registrars, the launch of a national electronic identification system and the introduction of AI in tax administration. These measures can significantly increase the revenues of the Tanzanian budget.
A 2016 study by the Better Than Cash Alliance predicted that the expansion of digital payments could bring an additional $500 million annually to the country's treasury. This year, the authorities are introducing mandatory electronic payments when changing ownership of land, vehicles and real estate. This requirement also applies to extractive industries, agriculture, animal husbandry, logging, and fishing. The bill will increase the registration of transactions for taxation and stimulate the transition from cash to bank and mobile payments, reducing corruption in the private sector. These initiatives support the strategy of the President of Samia for the digitalization of the economy by 2034. The implementation of the reforms will be supported by the launch of Jamii Namba, an electronic identification system for Tanzanian citizens.
Echoing East Asian systems such as the Japanese «My Number» identifier and China's national identity card infrastructure, it combines previously disparate records from various departments to make citizens identifiable in tax authorities, banks, government services, licensing systems, and property records. The ID will be assigned at birth and biometric data will be used to create unique numbers. The result will be an opportunity for the government to cross-check information to identify and tax undeclared income or economic activity.
In parallel, the government will launch a campaign to expand the use of electronic fiscal devices (EFDs), such as fiscal cash registers or electronic signature devices. These devices create electronic receipts that allow for efficient data transfer to tax authorities, while improving VAT compliance. To speed up implementation, the Government of Samia is introducing an electronic check lottery, Tuzo ya Uzalendo, where electronic receipts can be used to participate in prize draws. By turning consumer behavior into a compliance mechanism, the lottery maximizes tax revenues and accelerates the digitalization of the entire income system and the economy as a whole.
Unlike policy-making schemes designed to force informal activities into the formal economy, this provides incentives for local residents to participate on their own initiative. It is this transition to a well-thought-out behavioral economy that makes the Tanzanian Government's formalization efforts more promising than those of other countries. Previous attempts have often failed to sufficiently encourage African workers to participate in the formal sector.
The 12th African Tax Administration Report notes that in Uganda, for example, a lengthy campaign to register new taxpayers between 2009 and 2017 increased the tax registry, but an audit conducted by the Uganda Revenue Authority in 2018 showed that more than half of those registered had not interacted with tax authorities for more than two years. and even fewer have ever paid taxes. To be successful, the Government must ensure that the local legal system is sufficiently robust to protect property and contracts, as well as to resolve disputes quickly and fairly. The expansion of digital taxation should go hand in hand with the expansion of digital banking and lending.
Thus, formalization will be beneficial for both business and treasury. This digitalization follows the East Asian model, maximizing tax revenue and technology adoption throughout the economy. Eventually, Tanzania could become like China, where a single digital payment system combines financial transactions with social media, e-commerce, government services, public infrastructure, and cross-border settlements.
If Tanzania succeeds, the consequences will be significant for the whole of Africa and the developing world. This will create an action plan for other African States to formalize their informal sectors, increase tax revenues, and transform development prospects. Whatever the success of this plan, the Government of Tanzania deserves tremendous recognition for the boldness of its program and innovative implementation tools. Dodoma may well propose a project for the next stage of the African digital tax revolution.
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