High Court scraps Mthuli Ncube's 2020 taxes on fuel

The High Court has refused to endorse a new carbon tax on fuel and the redemption levy of the National Oil Company of Zimbabwe imposed two years ago on the grounds that these could not be levied by executive action through a statutory instrument, but had to be imposed directly by Parliament.

The Ministry of Finance and Economic Development introduced the two in June 2020 using powers granted by Parliament in the Finance Act.

But the High Court first found that Parliament did not have the constitutional power to delegate the setting of a tax rate and had to do this itself, thus causing the two statutory instruments to fail.

Mutare lawyer Mr Innocent Gonese sued Finance and Economic Development Minister Professor Mthuli Ncube accusing him of usurping Parliament's powers through the promulgation of Statutory Instrument 123A of 2020 and 145 of 2020 that created the new taxes.

Justice Siyabona Msithu scrapped the statutory instrument on the ground that the regulations were unconstitutional.

He also ruled that Section 3 (2) of the Finance Act was unconstitutional because it gave the Minister wide powers to amend an Act of Parliament.

He set aside the Finance (Amendment of Sections 22E (1) and 22H of Finance Act) Regulations, 2020, published as SI 123A of 2020 and the Finance (Amendment of Sections 22E (1) and 22H of the Finance Act) Regulations, 2020, published as SI 145 of 2020.

Mr Gonese had challenged Minister Ncube's powers for what was tantamount to amend an Act of Parliament.

He also argued that the Minister had no powers to split the tax between those importers who use free funds and those who do not.

In his counter-argument, Minister Ncube denied acting contrary to the law.

Mr J Bhudha from the Civil Division of the Attorney General, argued that Minister Ncube's conduct in implementing the law could not amount to abuse of his powers because the law permitted him to amend tax rates.

The amendment of the tax rates, he argued, were done in terms of Section 3 of the Finance Act, which gave him the power to act as he did in terms of the law.

It was also argued that the disputed section of the finance law reposed in the Minister the power to amend any rate of tax through regulations.

Mr Bhudha also denied that Minister Ncube created new taxation under the new regulations.

He said the Minister was simply exercising his duties that broadly entailed the formulation of the country's macro-economic policy.

Such policies included fiscal measures for reversing fiscal-disequilibrium announced on October 1 2018, which targeted, among other things, the volatile fuel sector.

In the final analysis of the submissions by both parties' counsel, Justice Msithu was satisfied that Section 3 of the Act as currently structured was unconstitutional as it confers upon the Minister powers to amend an Act of Parliament.

This, Justice Msithu said, offended some sections of the Constitution.

His finding is subject to the confirmation by the Constitutional Court.

Once the court determined that the impugned section was unconstitutional, the fate of the two Statutory Instruments was sealed to the extent that the Minister sought to regulate through them, matters that are the preserve of Parliament.

In this regard the Justice Msithu said the Constitution did not permit the legislature to delegate legislative powers to subordinate bodies or authorities whose effect was to allow such subordinate bodies to repeal or amend Acts of Parliament.