Finance minister Mthuli Ncube’s nightmarish start at the helm of Treasury worsened at the weekend, with the Law Society of Zimbabwe (LSZ) accusing him of violating provisions of the Finance Act by introducing the new 2% tax for each dollar on electronic transactions without seeking the necessary amendment to the Act.
This came amid reports that the new tax regime was not sanctioned by the Reserve Bank of Zimbabwe, as required at law.
The LSZ, in a statement, urged Ncube to rescind the decision and follow proper procedures.
“In light of the serious financial and practical implications of the announcement to all enterprise and common persons, there has been a public outcry and calls for the minister to rescind the announcement.
The Law Society of Zimbabwe and its members support the call that the two cents per dollar tax on all transactions be rescinded because, among other reasons, its imposition is unlawful,” LSZ said.
Ncube is accused of violating sections 22G of the Finance Act, which fixes a five cents tax for each transaction exceeding $10 on which the tax is payable and this, could only be changed through an Act of Parliament and not a Government Gazette.
“As the law stands, the minister’s directive to all financial institutions, banks and Zimra (Zimbabwe Revenue Authority) working together with telecommunication companies to collect $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,” LSZ said.
LSZ said Ncube could not take a “short-cut” on this matter because the current increase in tax was 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.
Among 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,” the statement read.
It is understood that RBZ governor John Mangudya was opposed to Ncube’s new tax measures, which, instead of bringing stability to the market, triggered price hikes while putting a huge dent on financial inclusion by the central bank.
“The RBZ was not consulted on the new tax measures which it views as a major dent on its drive for financial inclusion, acceptance of plastic money and has massive impact on attracting local and foreign investors,” a highly-placed source in the financial services sector told NewsDay.
In 2016, Mangudya capped bank and money transfer charges as part of efforts to bring down costs on plastic money transactions, before Ncube last week introduced a raft of measures including the two cents per dollar for every electronic transaction.
Ncube later reviewed the new tax following a public outcry and exempted other transactions, but left middle-income earners and ordinary people heavily exposed.
The Zimbabwe Congress of Trade Unions (ZCTU) at the weekend described the new tax regime as “retrogressive” and threatened to mobilise for mass demonstrations on Thursday to force Ncube to rescind the decision.
“This extension of the collection of the intermediated money transfer tax to all financial transactions is regressive in that it negates the very essence of such platforms that were established to promote financial inclusion,” ZCTU said in a statement.
“Taxing the formerly financially excluded poor people, especially in rural and urban communities, is highly retrogressive and regressive.”
Ncube, however, insisted that the poor were covered by exempting transactions below $10.
“We have covered that bit by revising the tax regime and saying all transactions of $10 or less are exempted from the tax, we have covered the poor,” Ncube said.
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