The Finance (No. 3) Bill is one of the Bills that will give legal effect to the Budget announced by the Minister of Finance last year. It was passed by the National Assembly on the 20th December last year and will be presented in the Senate when Parliament resumes at the end of this month. Some of the Bill’s provisions are already being implemented – for example, the two per cent tax on electronic money transfers – but there is a question whether the Bill can be implemented before it has been passed by the Senate and duly promulgated as an Act of Parliament.
The Minister of Justice, Legal and Parliamentary Affairs was reported in the media as saying the Bill becomes operational on the dates specified in it even though it has not yet been passed by the Senate, because the Senate has no power to amend or reject the Bill. Is this correct?
When do the Bill’s provisions come into force?
The general rule is that a Bill does not come into force as an Act of Parliament until it has been passed by the National Assembly and the Senate, then signed by the President, and published in the Gazette. Budget legislation such as the Finance (No. 3) Bill is unique, as the Minister said, in that most of its clauses are stated to come into operation on a specific date, often the beginning of a financial year [which in the case of this Bill is the 1st January 2019]. If the budget legislation comes into force as an Act later than an operative date specified in one of its clauses, then the clause concerned will be retroactive, i.e. it will be deemed to have come into operation on the specified date. This means that liability for any taxes imposed by the clause will be back-dated, though whether the taxes can actually be collected before the Bill comes into force may be open to doubt.
Two per cent tax on electronic money transfers not yet legal
The effect of back-dating is particularly doubtful in regard to the intermediated money transfer tax, i.e. the two per cent tax on electronic money transfers. The statutory instrument which originally imposed the tax (SI 205 of 2018) was invalid for reasons we outlined in Bill Watch 32 of 2018, in particular because it was not authorised by the statute under which it was purportedly made. Hence the tax could not – and still cannot – be legally levied. Clauses 4 and 13 of the Bill try to rectify this by amending the Finance Act and the Income Tax Act so as to allow the new tax to be levied and by back-dating the amendments to the date on which the original statutory instrument was published.
The problem is that SI 205 of 2018 (the original statutory instrument) was a nullity, so attempts to collect the tax are illegal and amount to unlawful seizures of property. It cannot be said that the taxpayers have voluntarily paid the tax by making electronic money transfers: with the current shortage of cash it is impractical for them to make payments in any other way, and they are not asked if they agree to the tax being deducted. An Act of Parliament cannot retrospectively validate such illegal conduct; validation would go against the principles of good governance, including respect for vested rights, which section 3 of the Constitution declares to be one of Zimbabwe’s founding values.
Powers of Senate
It is broadly correct, as the Minister of Justice has been quoted as saying, that the Senate does not have power to amend budget legislation such as Finance Bills because, in the terminology of the Fifth Schedule to the Constitution, they are regarded as “Money Bills.” Under paragraph 7 of that Schedule the Senate:
“does not have power to amend a Money Bill but may recommend that the National Assembly make amendments to it.”
However, this particular Bill may not be a Money Bill. The term “Money Bill” is defined in the Fifth Schedule to the Constitution as meaning a Bill that makes provision for:
- imposing, increasing or reducing a tax,
- appropriating money from a fund controlled by the Government,
- compounding or remitting a debt due to the State,
- condoning a failure to collect a tax, or
- condoning unauthorised governmental expenditure.
Most of the Bill’s clauses fall within this definition, but by no means all of them do. For example:
- clause 9, which will make company directors personally liable for their companies’ tax liability in certain circumstances
- clauses 20, 25 and 27, which will enact procedures for the recovery and collection of taxes
- clause 28, which will replace the standard scale of fines, thereby increasing the levels of all statutory fines.
Those clauses probably can be amended by the Senate.
In any event, as we indicated above Bills cannot come into force as Acts of Parliament until they have been considered by the Senate. This applies equally to Money Bills. So even though the Senate’s power to alter the Budget Bill may be restricted, the Senate cannot be by-passed. It must consider the Bill.
How Long Will it Take to Pass the Finance Bill?
This depends on whether Senators debate the Bill seriously. If they do not, it could pass all its readings in two sitting days, or even one if it is fast-tracked.
It would be surprising, though, if Senators did not debate some at least of the Bill’s provisions – in particular the clauses enacting the controversial two per cent tax on electronic money transfers. Debate cannot go on too long, however, because if the Senate does not pass a Money Bill within eight sitting days, then the National Assembly can resolve to send it to the President without waiting any longer – paragraph 7(4) of the Fifth Schedule to the Constitution. If the Senate wants amendments made to a Money Bill it is empowered to recommend those amendments to the National Assembly, which must consider them but is not obliged to accept any of them. If the National Assembly accepts an amendment, it can incorporate it in the Bill before it is sent to the President for signature.
All this to-ing and fro-ing between Senate and National Assembly would take time, so if the Senate does propose amendments we might have to wait till the beginning of March for the Bill to be promulgated as an Act.