Bridging the Digital Tax Gap: A Comparative Analysis of Online Business Taxation in Tanzania

The rapid expansion of online business has created increasingly complex challenges for tax systems worldwide, with developing countries such as Tanzania facing particular difficulties. As e-commerce and digital platforms reshape traditional business models, governments must urgently adapt outdated tax frameworks to capture revenue from digital transactions. Tanzania, like many other common law jurisdictions, struggles to regulate and tax its growing digital economy due to limited statutory definitions of online business, weak enforcement capacity and the predominance of informal trading through social media and mobile money platforms. The objective of this article is to critically assess the effectiveness of Tanzania’s current legal and administrative frameworks governing online business taxation, while situating these within broader global developments. The paper identifies key structural and operational gaps, including the absence of resident-focused provisions, lack of integration between mobile money operators and the tax authority and inadequate compliance mechanisms for small-scale digital entrepreneurs. To provide a comparative perspective, the study draws on experiences from Kenya, India and the United Kingdom jurisdictions that have made notable progress in implementing digital taxation measures. Particular attention is given to the adoption of digital services taxes, regulation of non-resident providers, the use of technological tools for real-time tax monitoring and the role of taxpayer education in enhancing compliance. These comparative insights highlight both the opportunities and challenges of aligning Tanzania’s framework with emerging international practices. The article concludes by recommending a set of legal, administrative, and technological reforms aimed at modernizing Tanzania’s digital tax regime. These include the development of digital economy tax strategy, introduction of significant economic presence provisions, implementation of a tiered digital taxation regime, building technological capacity, strengthening public awareness campaigns, extending VAT regulations to include residents and defining “online business” in law. Such reforms are essential to ensure equity, enhance compliance and secure long-term fiscal sustainability in the context of an evolving global digital economy.