Democratisation in Tanzania: No Elections Without Exemptions

In this paper, we contribute to a better understanding of the political economy of tax exemptions in African countries. Based on a simple demand-supply framework, we explore how, in the context of increasingly competitive elections and economic liberalisation in these countries, fluctuations over time in the volume of tax exemptions for companies and individuals are linked to the election cycle. Some of these fluctuations are driven, at least in part, by the demand for campaign financing and a corresponding willingness of companies and individuals to supply it. Ruling elites need political funding to stay in power. Business people need tax exemptions and other state-provided rents to be successful. Thus, mutual interests between major capitalists and the ruling political elite are central to the supply in the face of an increasing demand for political funding.