HomeEditorial CommentNcube should learn a lesson

Ncube should learn a lesson


EVEN though High Court judge Justice Happius Zhou’s ruling this week that the 2% intermediated transaction tax imposed by Finance minister Mthuli Ncube under a statutory instrument (SI) last year was unconstitutional has proved largely academic, it holds important lessons for the minister.

The judgment speaks to the importance of consultation, following the legislative processes, avoiding arbitrary taxation, robbery of taxpayers and backdating of laws to justify wrongdoing.

Ncube should have widely consulted before imposing the tax. He should not have just spoken to his principals and a few people alone on such a major issue which has serious tax implications for the economy and taxpayers.

After consulting, Ncube should have then followed the proper legislative process on the new tax legally. This would have prevented the hasty promulgation of an SI, which at the time lawyers said was “a nullity”. This would also have avoided arbitrary taxation. When government started collecting the 2% tax, the move was illegal as it amounted to unlawful seizure of property — theft.

Between October 2018 and February this year, government illegally collected billions of dollars from taxpayers until parliament passed the law. This money must be returned to the taxpayers. Backdating the law to cover government’s tracks on arbitrary taxation and theft — taxation without parliamentary approval before February — must be challenged in the courts.

Civic activist Mfundo Mlilo, who was represented by prominent lawyer Tendai Biti, also opposition MDC co-deputy leader, bravely challenged the legality of the unbearable catch-all tax.

Ncube introduced the tax through SI 205 of 2018 on October 12 last year. Mlilo took him to court and argued the tax was unconstitutional as a minister could not amend an Act of Parliament through an SI. The tax was imposed without amendments to the income tax laws.

But the ruling was rendered academic as parliament has since approved the tax by passing the Finance Act authorising the 2019 budget, and the subsequent supplementary budget issued on August 1, both of which allow for the 2% tax.

The 2019 annual budget was passed by the Lower House of Parliament on December 20, 2018 and by the Senate in January this year. The supplementary budget was passed by both Houses last month.

Although the Finance Act itself was not the subject of any court action, it was fast-tracked in February to pre-empt the court action on the tax. However, the issue of recovery of what was illegally collected from taxpayers remains a sore point for many.

Even if that judgment will not affect the levying of the tax as the SI was subsequently ratified by parliament under the Finance Act No 1 of 2019, important lessons can be drawn from this.

Government cunningly inserted the new tax into the Finance Act a day after Biti filed the case, but it did not repeal the SI. This means the tax will remain in place until the Act is repealed, but further action should be taken to recover billions stolen from taxpayers.

Recent Posts

Stories you will enjoy

Recommended reading