Tax war spills into court

Government's decision to charge a draconian two percent tax on electronic transactions is likely to face its first legal challenge today.

The Daily News can report that a Harare man, Mfundo Mlilo, is approaching the High Court today, seeking to have the tax reversed on grounds that it is "illegal and immoral."

Mlilo who is a director of the Combined Harare Residents' Association is challenging the lawfulness of the tax in his personal capacity.

He is arguing that the country's legal system does not allow government to repeal sections of an Act of Parliament without being debated and passed by the National Assembly.

"The respondent is the Finance minister Mthuli Ncube and the case is being argued by Tendai Biti," Mlilo told the Daily News.

"Our contention is that the purported increase is unlawful because the minister has purported to change a section of an Act of Parliament which in itself is unconstitutional as he should have tabled a Bill in Parliament first, which he has not done.

"We argue that the tax in itself is irrational because the government has been excessively borrowing and now that it has a runaway public debt it is now turning to citizens to cover up for its expenditure. We have no idea what the money was used for."

This comes as financial institutions, the Zimbabwe Revenue Authority and telecommunication companies on Saturday began extending the collection of the tax across all electronic transactions.

Introduced by Ncube last week, the two cents per dollar tax will not apply on transactions which are $10 or less.

There is a cap of $10 000 on the amount of tax to be paid, which means that transfers above $500 000 will attract a flat tax of $10 000.

Government gazetted the tax on Friday, resulting in retailers and other service providers reflecting the increase in their pricing.

Mlilo is insistent that while the tax does not respect the rule of law, it also takes away citizens' rights.

"Government through its own policies (of ease of doing business) forced citizens to use RTGS, mobile money and electronic transactions to the extent that 95 percent of all retail transactions are done electronically. It's unfair for the same government to then turn around and punish citizens for following policy," he said.

"Further, money is private property and the way this tax is designed, it is predatory and meant to infringe on our rights to property. In addition there has not been
sufficient consultations as a number of stakeholders if not most of industry was not consulted."

Legal observers are also of the view that the country's legal system does not allow government to repeal sections of an Act of Parliament without going through the National Assembly.

Harare lawyer, Obert Gutu, was quoted over the weekend saying ordinarily sections of an Act of Parliament cannot be repealed by a Statutory Instrument, which is a subsidiary piece of legislation that has to be anchored on a valid Act of Parliament.

"The Finance Act can only be lawfully repealed through the relevant Parliamentary processes and definitely not via a Statutory Instrument," opined Gutu.

Other legal experts also argued during the weekend that the law was a sign of government's continued disregard for procedural law which started with Ncube's attempt on October 1 2018 to give immediate effect to the two percent intermediated money transfer tax, through a ministerial statement.

Top Harare lawyer Chris Mhike said a decision as far-reaching and as material to the content of the Finance as the two percent tax on transaction must; naturally, logically and legally speaking, first be debated and passed by Parliament before being made into law.

"Through this new tax, government seeks to take away citizens' vested rights, in violation of Section 3 of the Constitution, that is the Founding Values and Principles upon which Zimbabwe is founded," said Mhike.

Justice, Legal and Parliamentary Affairs minister Ziyambi Ziyambi declined to comment when contacted by the Daily News yesterday.