Local Businessman Gives Government 14 Days Ultimatum To Reverse The New 2% Tax Or Face Constitutional Court Challenge

Apart from the outrageous move to separate US dollar accounts and RTGS accounts the Reserve Bank of Zimbabwe introduced, the 2 percent tax on every dollar transacted is also a talk of the town. The tax was introduced to help the government pay off its ever-increasing debt obligations. The national debt currently stands at $US16.9 billion, with domestic debt at $US9.5 billion, and foreign debt at 7.4 billion.

One businessman, Arnold Mutsondi didn’t take the new tax lightly so he has issued an ultimatum to the government demanding it to reverse the tax (back to 5cents per transaction). Failure by the government to reverse the tax will see Mr. Mustondi lodging a Constitutional Court Challenge in a fortnight.

Why the ultimatum says

In his letter to the Ministry, Arnold Mutsondi says the new tax is unlawful because “no reasonable notice was given by the government before the operationalization of the tax rate”. That means the government, according to Mr. Mutsondi’s letter (and according to the law, based on him), should have given notice of the tax before it was implemented because it has “far-reaching implications”. Here is the letter in full below;

RE: UNCONSTITUTIONALITY OF THE OPERALISATION OF THE REVIEWS TAX-INTERMEDIATED MONEY TRANSFER TAX BY THE MINISTRY OF FINANCE

OUR CLIENT ARNOLD MUTSONDI

We refer to the above matter and address you at the instance of our client, Mr. Arnold Mutsondi.

Our client is a Zimbabwean businessman and taxpayer. He runs a number of companies which routinely contribute to the fiscus. Our client has advised us that your Ministry has recently reviewed the Intermediated Money Transfer Tax tax rate which has customarily been pegged at 5 cents per transaction. It is our understanding that the tax in question was introduced by your Ministry for the first time in 2003. The rate of tax has never been altered up to September 2018.

Our client further advised us that during your Ministry’s presentation of the 2018 – 2019 Fiscal Policy review on the 1st of October 2018, it purported to arbitrarily impose an exorbitant tax rate of 2 cents per dollar effective the 1st of October 2018. This sudden change and operationalisation of the reviewed Intermediated Money Transfer Tax is unlawful, arbitrary, unfair, unreasonable and unjustifiable in a democratic society based on openness, justice, human dignity, equality and freedom.

It is an undeniable fact that the purported review of the Intermediated Money Transfer Tax which resulted in an exorbitant, usurious and exponential rate of 2 cents per every dollar is unconstitutional in terms of section 71 (3) of the Constitution of the Republic of Zimbabwe which clearly prohibits the deprivation of property. The Constitution provides, inter alia in section 71 (2) that every person has a right to property which includes their money. It is our client’s fortified view that the move by your esteemed Ministry to arbitrarily impose an exponential tax on its transactions or those of fellow Zimbabweans cannot be accepted in a democratic society. Our client’s views are buttressed in the provisions of the Constitution. In particular, the Constitution outlaws the action by your Ministry in the following regards:

i. No reasonable notice was given by your Ministry before the operationalization of the usurious tax rate as required in terms of Section 71 (3) (c) (i). Whilst the levying of the tax is permissible in terms of section 71 (3) on basis of a law of general application, section 71 (3) (c) (i) require reasonable notice to have been given by the Ministry considering the far-reaching implications of the tax rate in question. The fact that the Ministry purported to operationalise the usurious tax effectively on the 1st of October 2018 renders the actions by your Ministry unlawful on the above basis.

ii. The purported tax rate of 2 cents for every dollar is ridiculous, akin to fraud and induces a sense of shock to our client and the general public of Zimbabwe. In actual fact, the tax rate is retrogressive in the sense that it is not a reasonable derogation from the fundamental right to property recognized in section 86 (2) of the Constitution because it is unjustifiable, extortious, unfair, unnecessary and unjustifiable in democratic society based on openness, justice, human dignity, equality and freedom.

iii. The reviewed tax rate is a not a product of wide consultations which unfortunately results in an unlawful deprivation of a fundamental right to property

Further to the above, it is common cause that currently there is no adequate cash resources in Zimbabwe. Mindful of this fact, it is clear that our client and Zimbabweans at large appear being punished for the government’s failure to provide cash as they have no choice but to fall prey to the to the usury of your new tax regime. The imposition of this tax is not reasonably justifiable in a democratic society and offends the provisions of the Constitution.

Based on the aforegoing, our client has instructed us to demand, as we hereby do that your Ministry reverses the tax rate within 14 days of, this letter failing which we have strict instructions to approach the Constitutional Court for reversal of this catastrophic tax regime in Zimbabwe.

We advise accordingly and trust it shall not be necessary to engage in litigation over this.

Yours faithfully
ALEX F& ASSOCIATES

cc. Commissioner, Zimbabwe Revenue Authority
cc. Governor, Reserve Bank of Zimbabwe