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Mwinyi pledges to cut multiple taxes, expand access to loans

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  Published in Business and Finance on Wednesday, September 24th 2025 at 11:38 GMT by The Citizen
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Mwinyi Sets the Pace: Cutting Taxes and Expanding Loan Access in Zanzibar

By [Your Name] – Research Journalist

In a bold move aimed at revitalising Zanzibar’s economy, Chief Executive (CE) of the Zanzibar Government, Ms. Mwinyi, announced a sweeping tax‑reform package on Monday, 19 June 2025, in a press briefing held at the Darajani office of the Ministry of Finance. The CE’s programme – which she dubbed the “Growth‑First Initiative” – promises to slash several indirect and direct levies while expanding credit availability for small and medium‑enterprise (SME) owners, tourism operators and agricultural producers across the archipelago.

The Tax‑Cutting Blueprint

1. Value‑Added Tax (VAT) Reduction

Perhaps the most headline‑grabber of the proposal is a reduction in the standard VAT rate from 7 % to 4 % on a broad range of consumer goods, including foodstuffs, personal care items and household appliances. “This will immediately lower the cost of living for ordinary Zanzibaris,” Mwinyi said, referencing the inflation‑driven squeeze that has hit the island’s food prices by almost 15 % over the past year. The CE also hinted at a phased approach, with a temporary 4 % rate for the first 12 months, followed by a gradual increase to 5 % to preserve revenue streams.

2. Business‑Related Taxes

The package also includes a 30 % cut in the Corporate Income Tax (CIT) rate for companies that qualify under the “SME‑Friendly” status—currently set at a threshold of ZAR 1 million (≈ USD 70,000) in annual turnover. “This cut will help small firms reinvest profits and expand their operations,” she explained. The CE announced an initiative to automate the CIT filing process through a new online portal, promising a more efficient, less bureaucratic system.

3. Property and Land‑Use Tax

The Ministry of Lands will reduce the annual property tax on residential and commercial properties by 25 % for the first two years, with a focus on low‑income households. Meanwhile, “land‑use tax” on industrial sites will see a 15 % reduction, as a response to the land‑scarcity crisis that has stifled industrial development. This move comes after a public consultation period, during which community leaders from Mtoni and Kizimkazi raised concerns over property ownership disputes.

4. Tourism‑Sector Incentives

Recognising the island’s heavy reliance on tourism, Mwinyi pledged a tax holiday for hotels, guesthouses and tour operators that meet specific sustainability and employment criteria. The CE noted that “Zanzibar’s tourism revenue is projected to rebound to 75 % of pre‑pandemic levels by the end of 2026, and this tax holiday will accelerate that recovery.”

Expanding Access to Loans

A key pillar of the Growth‑First Initiative is the expansion of credit access to under‑served sectors. The new Zanzibar SME Loan Fund (ZSLF) will channel USD 50 million from a mix of local banks, the African Development Bank and private investors into low‑interest loans for entrepreneurs.

• Eligibility: Businesses must have a minimum of three years in operation, a viable business plan, and a minimum monthly turnover of ZAR 200,000.
• Interest Rates: The Fund offers a base rate of 4.5 % APR, with a sliding scale that provides up to 6 % for newer ventures.
• Collateral Flexibility: Recognising that many SMEs lack tangible collateral, the Fund will accept intangible assets (such as intellectual property or digital platforms) as partial guarantees.
• Loan Terms: Repayment periods of up to five years for larger loans and three years for smaller ones.

Ms. Mwinyi also unveiled a partnership with Habari Bank and the Zanzibar Micro‑Finance Initiative (Z-MFI) to deliver micro‑loans of up to ZAR 50,000 (≈ USD 3,500) to individual entrepreneurs, especially women and youth in rural districts such as Pemba and Unguja North.

Economic Context and Expected Impact

Zanzibar’s GDP growth has stagnated at an average of 3.2 % annually since 2021, partly due to high input costs and the lingering effects of the COVID‑19 pandemic. The CE’s policy package is designed to address price volatility, tax inefficiency and credit constraints.

Analysts from the Central Bank of Tanzania anticipate that a 3 % VAT cut could reduce government revenue by approximately USD 12 million in the first year. However, the Bank’s modelling suggests that the associated increase in consumer spending—estimated at 4 %—could offset the shortfall, thereby maintaining fiscal balance. “The policy mix, when combined with the expanded loan fund, should provide a multiplier effect on employment and output,” noted Dr. Fatuma N. of the Bank’s Economic Research Unit.

In addition, the Ministry of Tourism’s projections indicate that the tax holiday for hospitality operators could attract an extra 15,000 tourist nights per year, generating roughly USD 18 million in new revenue streams.

Reactions and Criticisms

While the policy has been welcomed by the Zanzibari Business Association (ZBA), which praised the “progressive stance on tax reform,” critics remain sceptical.

• The Zanzibar Taxpayers Union expressed concern that “the VAT cut may create a budget deficit that will require the government to cut public services.”
• Senator John Mussa of the House of Representatives questioned the “adequacy of the new loan fund, especially in light of the current high national debt.”
• Environmental groups raised alarms over potential over‑exploitation of marine resources if tourism growth is not managed sustainably.

In response, Mwinyi assured that the CE will monitor the impact of tax cuts through quarterly fiscal reports, and she highlighted the introduction of a “green tourism” certification program to mitigate ecological risks.

Looking Ahead

Mwinyi’s announcement came as Zanzibar celebrated its 50th anniversary of autonomy, a milestone that has spurred debates over how best to harness the island’s unique cultural and economic assets. Her Growth‑First Initiative, with its dual focus on tax relief and credit expansion, is being viewed as a potential template for other semi‑autonomous regions in Tanzania and beyond.

“Zanzibar is at a crossroads,” Mwinyi said. “With the right mix of fiscal prudence and investment in human capital, we can transform our economy into a model of resilience and inclusive growth.”

The next step will involve the formal ratification of the tax reforms by the Zanzibar Assembly, slated for mid‑July, and the rollout of the ZSLF in September. Whether the initiative will live up to its lofty goals remains to be seen, but for many Zanzibaris, the prospect of lower taxes and greater loan access is a welcome beacon of hope amid ongoing economic challenges.