ABSTRACT
In her 2007–2008 Budget speech, the Minister of Finance of the United Republic of Tanzania, Hon. Zakia Meghji, proposed an increase in excise taxes on petroleum products as a measure to increase government revenue. The suggestion entailed a 33% increase in the fuel levy and a 7% adjustment of excise duty on fuel to account for inflation. This proposal met with unprecedented outrage from members of parliament, the mass media, and large sections of the public. Their objections were largely based on two arguments: that such a tax increase was inflationary and regressive. In response to the uproar, the Minister of Finance withdrew the tax increase on kerosene, viewed as more regressive than the tax increase on petrol and diesel. In this rare turnaround, the Minister further reduced annual motor vehicle fees for motorcycles and other vehicles with engine capacity below 1,500 cc. while increasing such fees on luxury cars. As this episode shows, higher taxation of fossil fuel, an increasingly common policy option for African governments, is very unpopular. One of the reasons for objecting to this tax is its perceived regressive effect on distribution.
