Natural gas gets tax relief as government targets cleaner, greener future

Dar es Salaam. Tanzania's proposed 2025/26 Budget signals a strategic shift in the energy sector, introducing a mix of tax incentives to promote cleaner energy adoption and revenue-generating measures for fiscal stability and environmental protection.

The amendments highlighted by Finance minister Dr Mwigulu Nchemba on Thursday demonstrate intent to align economic growth with sustainable energy practices and enhance domestic resource mobilization.

A significant thrust of the new budget is to foster the use of natural gas and other clean cooking solutions. Under the Value Added Tax (VAT) Act, the government proposes to exempt VAT on natural gas sold to Compressed Natural Gas (CNG) stations for vehicle use.

“The measure is intended to provide relief to investors, attract investment in Compressed Natural Gas stations for vehicles, reduce carbon emissions, and dependence on oil,” he said.

Further supporting cleaner cooking, VAT will also be exempted on cooking gas tanks and cylinders, as well as on carbon dioxide removal plants used in the production of alternative charcoal.

Dr Nchemba, “The measure is intended to reduce the cost of acquiring these products with the aim to encourage the use of clean cooking energy in the country. This measure is expected to reduce Government revenue by Sh1.91 billion,”

However, the budget also introduces new levies to secure revenue and address environmental concerns. A notable addition is a new excise duty of Sh22,000 per tonne on carbon emissions generated from coal and natural gas.

“The measure is intended to broaden tax base and curb negative environmental impacts resulting from the use of these products. This measure is expected to increase Government revenue by Sh374.15 billion,” he said.

In a related move, excise duty will be exempted on un-denatured ethyl alcohol used for non-alcoholic applications, such as food flavors, aiming to reduce production costs and enhance the competitiveness of local industries.

Dr Nchemba revealed that the government continues with preparations for implementation of the Liquefied Natural Gas (LNG) processing project and conducting exploration and development activities for oil and natural gas in strategic blocks of Songo Songo West, Mnazi Bay North, Eyasi-Wembere and Blocks 4/1B and 4/1C.

It also continue with the distribution of natural gas to institutions, industries and households as well 42 as promoting usage of CNG in motor vehicles.

Further, the Government has completed connection of all regions into the National Power Grid.