Zimbabwe's illegal tax legislation

How often has the need for foreign investment (FDI) been stated? Nothing can put off a potential foreign investor more than to ascertain that the rule of law does not apply under Zimbabwe tax law. Firstly, Zimbabwe is not an attractive country for FDI, with its rather high tax rates and secondly, a very heavy indirect tax on making payments, not to mention the lack of hard currency.

Section 68 of the Constitution states that every person has a right to administrative conduct that is lawful, prompt, efficient, reasonable, proportionate, impartial and substantially and procedurally fair. All constitutional rights will be enforced by our courts.

Section 69 of the Constitution states that in the determination of civil rights every person has a right to a fair, speedy and a public hearing, within a reasonable time, before an independent and impartial court, tribunal or other forum established by law. Those rights are simply ignored by the Income Tax Act and by the Zimbabwe Revenue Authority (Zimra). I will explain this.

The persons who act for Zimra in collecting taxes must use fair administrative just actions to act lawfully. My experience, as a lawyer, is that they often do not, although certain individual senior employees certainly do. Obviously, one only expects honest persons to be employed by Zimra.

Potential investors always ask how the courts work here. I always state that they provide reasonable justice and reasonably quickly. I say that even, though in one particular case, I have just waited for three years to obtain a judgment. That was unusual and certainly did not comply with the Constitution. What is also disappointing is that the Supreme Court is also guilty, occasionally, of unacceptable delays in giving judgment, even though the Chief Justice criticised some of the High Court judges, for long delays in giving judgments.

It is extremely serious, legally, for a decision maker to be a judge in his own cause. A very famous judge, once said in a well quoted statement: "The court could declare an Act of Parliament void if it made itself a judge in its own cause."

On the same issue, a well-respected author says: "The rule is intended to ensure that judges and arbitrators are as independent as is practicable. It is, therefore, manifest, that a cornerstone of any fair and just legal administrative system, is the impartial adjudication of disputes which come before the courts and other tribunals."

To legally set aside a decision which offends this rule, it is not necessary to prove that the actual decision makers are biased. The courts have developed a test called "institutional prejudice", which was described by the famous Judge, Lord Denning, as follows: "Disqualifying bias will be found to exist where the reasonable lay observer would gain the impression that there is a real likelihood that the decision maker will be biased."

Senior Zimra employees have the right to issue an assessment to a tax payer, which is a document that claims the taxpayer owes a certain amount by way of tax. It has the same effect as a judgment. Normally, that employee will add a penalty of 100% and ask for interest as well. The Act gives the tax payer the right to formally object, which happens often, and the commissioner is given a right to decide the objection. That is clearly a case of being a judge in its own cause.

Zimra have imposed the tax and when the taxpayer complains, Zimra decides whether the complaint is valid, acting as a judge or decision maker. It has certainly been my experience as a lawyer that, even where a taxpayer has a good answer to an assessment, the complaint falls on deaf ears. It does not help him much to know that his complaint will then be judged by another Zimra person. The question of "institutional bias" then arises. Who would expect the commissioner, another Zimra employee to be impartial?

When I have complained about this, Zimra have replied that noting an appeal, to the court will provide an independent person to decide the taxpayer's objection, but that could take a very long time and does not stop Zimra acting on its own decision on the objection. So prejudice results to the tax payer from Zimra acting as a judge on its own cause and deciding the objection as Zimra, then claiming payment, even if an appeal is noted to the court. An appeal to the courts does not, in fact, stop Zimra acting on its own decision on the objection.

Zimra then insists on payment. The law, namely the Income Tax Act, allows Zimra to proceed on the decision of its own employee upholding an assessment of its own employee, that tax was due. No independent arbiter has the right to immediately intervene on the rejection of the objection.

Failing payment, Zimra garnishees the taxpayer's bank account and takes the money without notice to the taxpayer. The law does not even require Zimra to notify and provide copies of the request for the garnishee. The only speedy remedy then available to the tax payer is to ask the commissioner-general to suspend payment, pending the judgment on the court appeal.

So another Zimra person decides whether the first Zimra person was wrong to ask for payment immediately. Zimra is again a judge in its own cause.

"Institutional bias", again arises. Who would believe that the commissioner will act fairly and impartially to decide whether to suspend payment? Especially, when the commissioner is judged on whether she has met her target in collecting tax. Zimra will not only ask for payment of the alleged tax, but also a penalty of 100% and interest in most cases, and that will also be taken out of the taxpayer's bank account. I have in the past written to two different Finance ministers pointing out this illegality, but I have had no answer to my letters and nothing has happened.

The Administrative Justice Act requires Zimra to act fairly and promptly in making these decisions. Regretfully, those characteristics are seldom apparent in its decision making. I suppose it comes down to how honest Zimra employees are.

I agree with the many requests by Zimra for taxpayers to co-operate and pay their taxes, but this request will only be honoured more widely if Zimra acts fairly. All our new members of Parliament should make sure that the Income Tax Act is amended to prevent Zimra being a judge in its own cause. The requests for fair treatment are stacked against the tax payer.

A provision of a 100% penalty is totally unfair. It was legislated when we were subject to enormous inflation, and the 100% was not terribly important, but if one considers the penalties or fines that are normally imposed by the courts for breaches of other laws, these penalties are totally out of proportion to the culpability. I wonder how people would react, if on failing to pay their rates a 100% penalty was imposed making it compulsory for the rate payer to pay a total of 200% of the amount not paid. At the moment no penalty is imposed on late rates' payments.

The onus is also placed on the tax payer by the Tax Act, to prove that his defence is correct in every detail. The money is taken from his bank account, even if he needs it to pay school fees or for food. All takes place before he is able to put his defence to an independent judge.

This can happen despite the tax payer having a valid legal defence. This is because the Tax Act provides for Zimra to be a judge in its own cause. The taxpayer has his money taken from his bank account by a decision of persons biased against him. All done in terms of an Act, which year after year, is passed by the majority in Parliament!

The principle the courts have applied is the perceived likelihood of bias. Zimra would fail this test as obviously everybody would consider it was likely that a Zimra employed Judge would favour the Zimra employee who imposed the penalty. The same principle will apply in asking the commissioner-general to suspend payment of a tax imposed by a colleague.

Finally, on the law, I quote from what the judge said in a recent matter: "The proper starting point is the rule that every hearing of a disciplinary nature must not only be a fair hearing; it must also be seen to be a fair hearing. It cannot be seen to be a fair hearing if people think that the judge is biased. The rule against bias is one of the cornerstones of the rules of natural justice. It should take effect with all its vigour."

Lindsay H Cook is a Harare-based senior lawyer with vast experience in tax law, practicing at Atherstone & Cook.