Traders sue Zimra

THE High Court is expected rule on a test case in which traders are challenging a Statutory Instrument that gave the Zimbabwe Revenue Authority power to impose civil penalties on businesses that fail to install electronic signature devices on their tills.

According to SI 153 of 2011 all points of sale (tills) for Value Added Tax-registered traders have to be connected to Zimra to inform the authority of any sales made for purposes of taxing.

Failure to do so attracts a daily penalty of US$25 per till without going to court.

Traders argue that the SI takes away their Constitutional right to be heard in court and grants Zimra too much unchecked power.

They add that instrument is inconsistent with the Value Added Tax Act, which only permits Zimra to impose fines on companies that fail to pay tax.

Non-installation of the signature device, according to the traders, is not the same as failing to pay taxes.

Several companies have been fined for failing to comply with the instrument, and most of them cited the high cost and technically complicated procedures associated with installation as their major constraint.

Edgars Stores Private Limited, fined US$187,100, launched the test case that is expected to either quash the whole SI or compel defaulting traders to pay fines.

The company wants the court to nullify the SI and quash the debt on the basis that it is inconsistent with the Value Added Tax Act and in breach of the Constitution of Zimbabwe.

Justice Erica Ndewere on Thursday heard arguments from both parties and reserved judgment.

Advocate Thembinkosi Magwaliba represented Zimra while Paul Paul acted for Edgars.

Edgars listed Finance and Economic Development Minister Patrick Chinamasa and Zimra Commissioner-General Gershem Pasi as respondents.

The company, through its director James Galloway, says: "I have been informed by our legal advisors that the amendments made by SI 153/11 are ultra-vires the powers given to first respondent in terms of the Act in that the Act only permits second respondent to impose a penalty for non-payment of tax.

"In respect of all other contraventions, the Act requires that there should be a criminal prosecution where a suitable penalty is imposed by a court of law."

Edgars further argues that courts must be involved whenever fines are imposed so that the accused can explain why they should not be convicted. If convicted, Edgars continues, the offender gets an opportunity to make submissions in mitigation.

Galloway also contests the SI's constitutionality.

"I also have been informed that the amendment is unconstitutional as it deprives registered operators of their constitutional right to accessing the courts…" he says.

Comm-Gen Pasi filed an opposing affidavit saying although the installation of the devices was highly technical, companies had been given enough time to comply.

He further disputes that the Act only allows Zimra to impose penalties for non-payment of taxes.

"It is disputed that the VAT Act provides for the imposition of a penalty in respect of contraventions involving the non-payment of tax and that offenders can only be prosecuted for any other contraventions," says Comm-Gen Pasi.

Zimra says traders' right to access courts was never taken away.