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Tanzania loses about US$1.5 billion annually due to illicit financial flows, which experts think could be used in climate financing. A new report on how taxation can be an effective tool for climate financing in resource-rich Tanzania, conducted jointly by a local think-tank Policy Forum and Tax Justice Network-Africa.
Illicit Financial Flows (IFFs) are one of the biggest obstacles for Tanzania to increase its domestic revenue collection capacity, despite the government implementing various measures to combat IFFs. Among other things, it assesses the effects of climate change in Tanzania. It determines how much the current International Financial System has led to tax injustice, hindering effective revenue collection in the country’s extractive industry.
Domestic revenue is crucial for African countries to address the effects of climate change and achieve the African Agenda 2063, stated Deputy Minister of Union and Environment, Khamis Hamza Khamis at the launching of the report. He described the situation where African countries, despite contributing minimally to environmental pollution, still face significant impacts of climate change, posing challenges to the continent’s economic growth. To address these climate change challenges, more innovation is needed in the systems, especially in the financial sector. The country needs to mobilise domestic resources from the extractive sector to enable funding for various projects to mitigate the significant impacts of climate change. As a country, Tanzania requires local funding to mitigate the effects of climate change.
Meaningful climate action requires tax justice to curb illicit financial flows and revenue leakages from the extractive sector. Domestic revenue mobilisation from the extractive sector is key to Africa’s response to the climate crisis. This study lays the foundation for tax justice and climate justice through mobilising domestic resource mobilisation. Tanzania’s extractive sector has been contributing a significant amount to the country’s gross domestic product, from 4.8 per cent in 2016/17 to 7.2 per cent in 2020/21. It has been contributing significantly to tax revenues and foreign exchange.
The report has laid down several proposals that can ensure Tanzania benefits from its extractive sector and thus be in a position to finance its climate actions.
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Tanzania is one of the African countries most vulnerable to climate change despite contributing very little to global greenhouse gas emissions. According to the World Bank, by 2050, approximately 86 million Africans will be forced to migrate due to the lack of water, low agricultural productivity, floods, and storm surges resulting from climate change, emphasising the need for the continent to adapt and mitigate these climatic effects.
