New Tax Not Legally in Force – Bill Watch 29 / 2018

New Intermediated Money Transfer Tax – No Statutory Instrument Gazetted

What Minister Ncube said on 1st October

In his statement Fiscal Measures for Reversing Fiscal Dis-equilibrium delivered on 1st October the Minister of Finance and Economic Development said:

“I hereby review the Intermediated Money Transfer Tax from 5 cents per transaction to 2 cents per dollar transacted, effective 1 October 2018. I am therefore directing financial institutions, banks and ZIMRA, working together with telecommunication companies to extend the collection to all electronic transactions.”

But Law Still Unchanged

As at the time of writing [2.30 pm, 4th October] the law remains unchanged. It is still as it was before the Minister’s statement: the rate of the Intermediated Money Transfer Tax is “US$ 0.05 for each transaction exceeding US$ 10,00 on which the tax is payable” as provided by Parliament in section 22B of the Finance Act [Chapter 23:04].

What the Minister Should Have Done

The Zimbabwean legal system does not allow a Minister to change any law, let alone an Act of Parliament, by a Ministerial statement.

The Minister’s should have been advised to gazette regulations changing the rate of the tax on the same day as his statement, the 1st October.

He the power to make such regulations under section 3(2) of the Finance Act.

If the Government wishes to persist with the new tax rate despite the adverse reaction in several sectors, the Minister can still make regulations now. Regulations made under section 3(2) of the Finance Act, however, must, as required by section 3(3), be promptly confirmed by Act of Parliament: Section 3(3) states:

“If any provision contained in regulations referred to in subsection (2) is not confirmed by a Bill which –

(a) passes its second reading stage in Parliament on one of the twenty eight days on which Parliament sits next after the coming into operation of the instrument: and

(b) becomes law not later than six months after the date of such second reading;

that provision shall become void as from the date specified in the instrument as that on which the rate of tax duty, levy or other charge shall be amended or replaced, and so much of the rate of tax, duty, levy or other charge as was amended or replaced, as the case may be, by that provision shall be deemed not to have been so amended or replaced.”

This means that if the time limits for confirmation are not complied with, any changes they may have made will fall away as if never made at all [same Act, section 3(3)] [i.e. taxes, etc collected might have to be refunded].

Implementation of the New Tax Must be Delayed

If they have already implemented or continue to implement the Minister’s legally ineffective review / directive, ZIMRA, financial institutions, banks and telecommunications companies will have done so at their peril. And they should bear in mind that if and when the Minister makes appropriate regulations, any attempt to backdate the new rate of tax to 1st October is likely to face a stiff constitutional challenge. Unlike the former Constitution, the present Constitution specifically commands “respect for vested rights” [section 3(2)(k)]. [Note: “vested rights” are those that already exist which cannot be impaired or taken away (as through retroactive legislation).]

Source: Veritas

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