This paper analyses the performance of excise taxation in Tanzania in terms of revenue generation objective with a view to identifying its revenue potential. In pursuit of this objective, the paper measures the buoyancy and elasticity of excise taxes, estimates demand functions for excisable goods and computes revenue-maximising tax rates. Consequently, the paper identifies goods that should bear excise tax. Both short- and long-run estimation results for buoyancy and elasticity show that excise tax revenue is inelastic with respect to the quarterly change in GDP. In addition, the buoyancy of excise tax has been higher than elasticity, implying that discretionary changes undertaken over the period of the study enhanced revenue collection. The estimation results of the demand functions for cigarettes, motor fuel, beer, 'Chibuku' and 'Konyagi' gin, show inelastic own-price elasticity of demand implying that the government can collect more revenue by levying higher rates of excise tax on these products. The revenue-maximising tax rates for cigarettes, motor fuel and beer are high both in the short and long run. Copyright 2006, Oxford University Press.