GOVERNMENTâ€™S decision to review the tax brackets through a statutory instrument issued two weeks ago is illegal because the instrument was incorrectly drafted, tax experts have said.
According to a newsletter released by PriceWaterhouseCoopers (PWC), an international auditing firm, the statutory instrument released last Tuesday was incorrectly drafted.
â€œThe law as presented through a statutory instrument was basically incorrectly drafted,â€ says PWC.
â€œThe â€˜contra fiscumâ€™ rule should therefore negate this legislation until it is amended. However, we approached Zimra (Zimbabwe Revenue Authority) and they have told us to follow the law in its present form, that is taking up to 60% plus 3% Aids levy for a maximum effective rate of 61,8% on an income of over $20 billion a month,â€ PWC said.
Other tax consultants said the bone of contention for the controversial law emerged after its passing.
â€œThe constitutionality of the law is questionable because it was passed when cabinet was dissolved,â€ said a local tax consultant.
The statutory instrument was gazetted by the Minister of Finance, Samuel Mumbengegwi in accordance with Section 3 of the Finance Act well after the dissolution of cabinet on March 28.
However, law experts said a statutory instrument is deemed â€œincorrectly draftedâ€ when it is not consistent with an Act of Parliament.
â€œFor any statutory instrument to be legally valid, it must not be ultra vires the enabling Act from which it is derived,â€ said Obert Gutu, a Harare lawyer.
â€A statutory instrument is subsidiary legislation that must be consistent with the provisions of the Act of Parliament from which it is derived. Thus, a statutory instrument is deemed incorrectly drafted if it seeks to go against and or beyond the parameters of the enabling Act. Put differently, a statutory instrument is invalid to the extent of its inconsistency with the provisions of the enabling Act of Parliament,â€ he added.
â€œIf Zimraâ€™s directive contradicts the â€˜contra fiscumâ€™ rule, then it logically follows that the said directive lacks legal validity and thus, can be successfully challenged in a competent court of law, in this case the High Court,â€ Gutu said.
In terms of a statutory instrument legislated on Tuesday, an employee earning less than $300m monthly will now be exempted from income tax. According to the law income tax on high earners getting more than $20 billion per month was increased to 60%. The statutory instrument also increased the number of tax brackets from seven to 11. The average number of tax brackets in Central and Southern African countries excluding South Africa (6) is five.Â
Â In a related matter politicians challenged the constitutionality of the current governance saying cabinet had passed its term of office. MDC secretary-general and lawyer Tendai Biti recently described the current governance as â€œexpiredâ€.
Contrary to Bitiâ€™s claims Information minister, Sikhanyiso Ndlovu yesterday was reported in a local daily saying the entire cabinet under President Robert Mugabe was still functional under constitutional provisions.
By Bernard Mpofu