Section 36G reads as follows;
“There shall be charged, levied and collected throughout Zimbabwe for the benefit of the Consolidated Revenue Fund an intermediated money transfer tax in accordance with the Thirtieth Schedule at the rate fixed from time to time in the charging Act.”
Pursuant to the provisions of section 36G cited above, section 22 (G) of the Finance Act currently provides that;
“the intermediated money transfer tax chargeable in terms of Section 36(G) of the Taxes Act shall be calculated at the rate of US$0.05 for each transaction exceeding US$ 10.00 on which the tax is payable”.
The import of section 22G is that a fixed charge of US$0.005 is chargeable on every transaction exceeding US$ 10.00. Section 22G has not been repealed and remains the only lawful tax chargeable on such transactions. As the law stands, the Minister’s directive to all financial institutions, banks and ZIMRA working together with telecommunication companies to collect US$ 0.02 per every dollar transacted is unlawful because it violates section 22G of the Finance Act. The proper procedure for the amendment of a law (in this instance Section 22G of the Finance Act) is through Parliament as required by the Constitution and not through a policy statement.
The current increase in tax is a compulsory acquisition of property rights which, at law, should be conducted in strict compliance with the constitution. Property rights enshrined in section 71 of the Constitution are jealously guarded. To that end an acquiring authority must comply with the requirements of the law to the letter. Amongst those requirements is section 71(3) (c) (i) of the Constitution which calls upon an acquiring authority to give reasonable notice before acquisition is effected. In this particular instance, no notice was given in that the tax increase came into effect on 1 October 2018, on the very date of announcement. The tax increase was unlawfully imposed and consequently is not likely to pass Constitutional muster.
While the government’s power to impose tax serves an important purpose namely, to raise revenue, such power must be exercised within the confines and safeguards of the Constitution. Further apart from the need for procedural compliance the tax appears arbitral and grossly unreasonable. The tax introduces a heavy financial burden on an already overtaxed population and in particular the few who remain in the formal sector. This tax flies in the face over the mantra “Zimbabwe is open for business.” To demonstrate the unreasonableness of the tax is the debt collection example below:
When a lawyer sues a debtor and recovers a debt the government will recover 6% tax as follows:
- a) 2% on the payment by debtor into lawyer’s trust account
- b) a further 2% when the lawyer pays to his client and
- c) when the client uses the money to run his business e.g through purchasing raw materials.
It is in light of the above that the Law Society of Zimbabwe and its members call upon the Minister and Government to rescind the unlawful upward review of the Intermediated Money Transfer Tax.