If Banks Start Collecting Mthuli Ncube’s New Tax, They Will Be Breaking The Law: Veritas

The new tax on electronic transactions that was announced by Minister of Finance, Mthuli Ncune has been the most topical thing this week. A few people have said the tax is not legal and almost all of them have been giving different reasons why this is so.

Veritas has gravitas

Veritas, a really cool legal organisation that breaks these things down in simple language for the likes of us has weighed in too. Here’s what they say:

The Zimbabwean legal system does not allow a Minister to change any law, let alone an Act of Parliament, by a Ministerial statement.

The Minister’s should have been advised to gazette regulations changing the rate of the tax on the same day as his statement, the 1st October.

He has the power to make such regulations under section 3(2) of the Finance Act.

So no such gazetting of the new tax has been done even up to now. This therefore means according to Veritas:

 As at the time of writing [2.30 pm, 4th October] the law remains unchanged.  It is still as it was before the Minister’s statement: the rate of the Intermediated Money Transfer Tax is “US$ 0.05 for each transaction exceeding US$ 10,00 on which the tax is payable” as provided by Parliament in section 22B of the Finance Act [Chapter 23:04].

This does not mean however, that it’s too late for the law to be gazetted and for it to become applicable:

If the Government wishes to persist with the new tax rate despite the adverse reaction in several sectors, the Minister can  still make regulations now. Regulations made under section 3(2) of the Finance Act, however, must, as required by section 3(3), be promptly confirmed by Act of Parliament

There are timelines involved that must be met. The gazetted regulation has to be confirmed by Parliament into a bill  which has had it’s second reading within 28 sittings of Parliament and then gets signed into law by the President all within 6 months of the gazetting of the regulation. If this doesn’t happen even the gazetted regulation itself will become void.

All this is a moot point though because what the minister announced on Monday has not been gazetted and it can’t be treated as law. Veritas firmly says:

If they have already implemented or continue to implement the Minister’s legally ineffective review/directive, ZIMRA, financial institutions, banks and telecommunications companies will have done so at their peril.

Some banks had sent messages to customers informing of new charges but I haven’t found any bank or mobile money service that had already started collecting the exorbitant fees.

They can’t back date

Veritas goes on to say:

And they should bear in mind that if and when the Minister makes appropriate regulations, any attempt to backdate the new rate of tax to 1st October is likely to face a stiff constitutional challenge.  Unlike the former Constitution, the present Constitution specifically commands “respect for vested rights”

Vested rights are rights that already exist and cannot be taken away in retrospect.

If the government goes ahead to regularise this new tax, the motivation will most likely be pride and not much else. This is the part where leadership will be tested. I will tip my hat to Mthuli Ncube if he eats humble pie and admits that this was a mistake. I mean just that, not to come up with some PR spin but to admit this was ill conceived and not thought through and on top of all, illegal.

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