The Tanzania Revenue Authority (TRA) is under intensifying pressure to overhaul its draconian "pay-to-complain" policy, as businesses across the region warn that the mandatory tax deposits are choking cash flows and killing enterprise.

At the heart of the dispute is the controversial requirement for businesses to deposit one-third of a disputed tax assessment before they can legally object to it. For a small SME in Dar es Salaam or a cross-border trader in Namanga, this means locking up vital working capital for months, or even years, while bureaucratic wheels turn slowly.

The "Guilty Until Proven Innocent" Tax

Section 51(6) of the Tax Administration Act allows the Commissioner General to waive this deposit, but only for "good reasons." In practice, "good reasons" are as rare as rain in a drought. Business lobbies argue this discretion is applied inconsistently, turning a procedural rule into a weapon of extortion.

• Cash Flow Crisis: A business hit with a TZS 100 million (KES 5 million) assessment must pay TZS 33 million just to say "you are wrong."
• The Waiver Mirage: Applications for waivers are frequently rejected without clear explanation, forcing businesses to choose between paying the deposit or accepting an incorrect tax bill.
• Regional Impact: Kenyan investors in Tanzania cite this non-tariff barrier as a primary risk factor, chilling cross-border expansion under the East African Community (EAC) protocols.

Looking Beyond Bank Balances

The argument gaining traction in 2026 is that the TRA must look "beyond bank balances." A company might have cash in the bank, but that cash is owed to suppliers, earmarked for salaries, or needed for stock. Seizing it as a deposit can trigger insolvency.

"You cannot milk a cow by starving it," argues a leading tax analyst in Dar. "By freezing working capital, the state may secure a short-term deposit but loses the long-term tax revenue that comes from a growing, profitable business."

A Call for Reform

As Tanzania positions itself as a premier investment destination, this policy remains a stubborn relic of a more hostile era. The solution proposed is simple: accept a bank guarantee or a bond instead of hard cash. This secures the government’s interest without draining the taxpayer’s liquidity.

Until the law changes, the message to investors is mixed: Come to Tanzania, but bring extra cash—you might need it just to defend yourself against the taxman.