Full Text: Mthuli Ncube's Tax Must Be Rescinded, It's Arbitrary, Grossly Unreasonable - Law Society
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The Law Society of Zimbabwe (LSZ) has called on the government to rescind the upward review of the Intermediated Money Transfer Tax which the society described as unlawfully imposed, arbitral and unreasonable. The tax was introduced by Minister of Finance Mthuli Ncube when he presented the fiscal measures on Monday following the Monetary Policy Statement. Ncube reviewed the tax from 5 cents per transaction to 2 per cent per transaction. However, Ncube was forced to review the date when the tax would come into effect after it was pointed out that his pronouncement was illegal.
We publish the statement from the LSZ below:
On the 1st of October 2018, the Minister of Finance and Economic Development (“The Minister”) announced the upward revision of the Intermediated Money Transfer Tax with immediate effect as follows:
“I hereby review the Intermediated Money Transfer Tax from 5 cents per transaction to 2 cents per dollar transacted, effective 1 October 2018.”
In light of the serious financial and practical implications of the announcement to all enterprise and common persons, there has been a public outcry and calls for the Minister to rescind the announcement. The Law Society of Zimbabwe and its members support the call that the 2 cents per dollar on all transactions be rescinded because amongst other reasons, its imposition is unlawful.
The legal position is that transaction tax lawfully levied in terms of section 36G of the Income Tax Act as read with the 30th Schedule thereof and Section 22G of the Finance Act. Paragraph 2 of the 30th Schedule to the Income Tax Act provides that:
“Whenever a financial institution mediates the transfer of money otherwise than by cheque—
(a) between 2 persons; or
(b) from 1 person to 2 or more persons; or
(c) from 2 or more persons to 1 person;
the financial institution concerned shall pay to the Commissioner an intermediated money transfer tax on each such transaction.”Section 36G reads as follows;
“There shall be charged, levied and collected throughout Zimbabwe for the benefit of the Consolidated Revenue Fund an intermediated money transfer tax in accordance with the Thirtieth Schedule at the rate fixed from time to time in the charging Act.”
Pursuant to the provisions of section 36G cited above, section 22 (G) of the Finance Act currently provides that;
“the intermediated money transfer tax chargeable in terms of Section 36(G) of the Taxes Act shall be calculated at the rate of US$0.05 for each transaction exceeding US$ 10.00 on which the tax is payable”.The import of section 22G is that a fixed charge of US$0.005 is chargeable on every transaction exceeding US$ 10.00. Section 22G has not been repealed and remains the only lawful tax chargeable on such transactions. As the law stands, the Minister’s directive to all financial institutions, banks and ZIMRA working together with telecommunication companies to collect US$ 0.02 per every dollar transacted is unlawful because it violates section 22G of the Finance Act. The proper procedure for the amendment of a law (in this instance Section 22G of the Finance Act) is through Parliament as required by the Constitution and not through a policy statement.
The current increase in tax is a compulsory acquisition of property rights which, at law, should be conducted in strict compliance with the constitution. Property rights enshrined in section 71 of the Constitution are jealously guarded. To that end an acquiring authority must comply with the requirements of the law to the letter. Amongst those requirements is section 71(3) (c) (i) of the Constitution which calls upon an acquiring authority to give reasonable notice before acquisition is effected. In this particular instance, no notice was given in that the tax increase came into effect on 1 October 2018, on the very date of announcement. The tax increase was unlawfully imposed and consequently is not likely to pass Constitutional muster.
While the government’s power to impose tax serves an important purpose namely, to raise revenue, such power must be exercised within the confines and safeguards of the Constitution. Further apart from the need for procedural compliance the tax appears arbitral and grossly unreasonable. The tax introduces a heavy financial burden on an already overtaxed population and in particular the few who remain in the formal sector. This tax flies in the face over the mantra “Zimbabwe is open for business.” To demonstrate the unreasonableness of the tax is the debt collection example below:
When a lawyer sues a debtor and recovers a debt the government will recover 6% tax as follows:
a) 2% on the payment by debtor into lawyer’s trust account
b) a further 2% when the lawyer pays to his client and
c) when the client uses the money to run his business e.g through purchasing raw materials.It is in light of the above that the Law Society of Zimbabwe and its members call upon the Minister and Government to rescind the unlawful upward review of the Intermediated Money Transfer Tax.
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