LIVINGSTONE MARUFU
Harare lawyer and opposition stalwart Tendai Biti has vowed to go all out to ensure that the government scraps the 2 percent intermediated money transfer tax introduced by Finance Minister Mthuli Ncube last year, after a sweet victory in the High Court yesterday when the Court set aside the legislation which introduced the controversial tax.
Justice Happias Zhou set aside Statutory Instrument 205 of 2018 which introduced the tax. This technically scraps the tax, but it remains unclear whether or not the judgment will be purely academic as the government in its 2019 Finance Act made provisions for the “2% Tax”. Activist Mfundo Mlilo, who was represented by Biti, was challenging the 2 percent tax.
In an interview with Business Times, Biti expressed the hope that the judgment would provide a starting point to challenge the legality of the tax under the Finance Act.
“We are still waiting for the judgment and as you are aware they tried to legalise the tax through the Finance Act. We are waiting for the judgment to see if we can use it to challenge the Finance Act,” Biti said in a telephone interview. He described the result as a great victory for justice.
“It’s a judgment that proves our position that the Zanu PF government acts illegally. It proves that these people don’t act within the law. It shows there is a government that rules with no rule of law,” Biti said.
He was on the record to have said the 2% tax burdened already struggling Zimbabweans.
But the tax came at a time when the government intended to cut expenditure. Minister Ncube, however, said the judgment will not affect the collection and levy of the intermediated money transfer tax on grounds the collection of the tax under SI205/2018 was subsequently validated by Parliament under Finance Act No. 1 of 2019 “Consequently, the 2 percent tax will continue to be levied, ”Ncube said in a Press release yesterday.
Lawyer Obert Gutu said the ruling would not affect the 2% tax. “In law, there is something called a ‘brutum fulmen’, essentially meaning an empty or ineffective threat; or put alternatively, a judgment that is incapable of being enforced, mostly because it would have been overtaken by events. I thought it is important to clarify a few issues.”
The opposition MDC said the ruling vindicated its position that the government was illegally milking the suffering citizens of this country.
“We also argued that Zimbabwe was in a recession characterised by low productivity, stagnation and weak or non-existent aggregate demand. In these circumstances, the logic of recession economics demanded that the government drastically reduces taxes in order to allow people to have disposable incomes,” the party said in a statement.
“We are aware that Zanu PF has sought to cover the illegal tax in a belated 2019 Finance Act but what the judgment does is to give Zimbabweans a further legal basis for a future challenge on the tax.”
Economist Prosper Chitambara said the government was likely to appeal against the ruling, given the huge cost in terms of the revenues that were coming from the tax. Apart from that, Chitambara said, the judgment spelt financial doom to the fiscus as the government was getting a lot of money from the tax. In the first half of the year, the government raked in ZWL$671.7m from the tax, up from the target of ZWL$565.9m.
On the other hand, the ruling could improve confidence in the economy as it would reduce the cost of doing business, if implemented. “Taxes are generally not received well because they are a cost to business and this speaks to confidence,” Chitambara said.
“The tax made electronic transactions more expensive and gave people incentives to use cash; this ruling might just have a positive impact there.”
