The
applicant's case is premised on a set-off which is disputed by the respondent.
In
terms of section 58 of the Income Tax Act [Chapter 23:06], the respondent is
empowered to appoint any person, including a bank, as his agent for the purpose
of collecting withholding tax. The payment by the applicant in 2007 to ...
The
applicant's case is premised on a set-off which is disputed by the respondent.
In
terms of section 58 of the Income Tax Act [Chapter 23:06], the respondent is
empowered to appoint any person, including a bank, as his agent for the purpose
of collecting withholding tax. The payment by the applicant in 2007 to 2008 of
the foreign currency now the reason of this dispute was made to the Reserve
Bank of Zimbabwe - which only made payment to the respondent in local currency.
The respondent did not have a foreign currency account with the Reserve Bank.
In seeking to deny receipt of the monies in question during the relevant period
the respondent has stated that the Reserve Bank was not its agent in terms of
the Income Tax Act [Chapter 23:06] for the due collection of tax.
The
applicant does not dispute this.
Rather,
the position taken by the applicant is that as both the Reserve Bank and the Zimbabwe
Revenue Authority fall under the umbrella of the fiscus and that the payment
made by the applicant should be recognized as having been received by the
State. The argument advanced by the applicant is that as long as it can be
shown that the Government benefited from the payment, then the set-off should
be implemented in favour of the applicant.
In
2007, the tax due from the applicant was in local currency - this much is
admitted. The applicant, however, chose, in a transaction agreed between itself
and the Reserve Bank, to pay an amount to the latter in foreign currency and
the Zimbabwe Revenue Authority was then credited with an amount in local
currency. The applicant has not taken this court into its confidence as to the
circumstances under which the payment to the Reserve Bank was made. It cannot,
however, state that it was paying its tax under the arrangement with the
Reserve Bank.
This
state of affairs between the applicant and the respondent has been existing for
the better part of 2009 and 2010, and one would assume that the applicant, in
order to seek a resolution to the impasse would have approached the court for a
declaratur. Even when it became obvious that the respondent might act to recover
the disputed tax, the applicant has not brought the dispute to court for
clarity on whether or not the monies it paid to the Reserve Bank can be set-off
against what it now owes the respondent. In my view, the applicant has to
establish that in the circumstances of this case, it would be entitled to claim
a right of set-off against the respondent.
Set-off
is a process whereby debts which are mutually owed between the same parties are
extinguished. In order that one debt be set-off for another, it is a prerequisite
that both debts be liquid. In addition, the debts must clearly be between the
same parties. Counsel for the respondent referred me to CoT v First Merchant
Bank 1997 (1) ZLR 350 (S) in which the Supreme Court made it clear that where
debts are due by Government departments, a debt owed by one department cannot
be off-set against one owed by a different department. At p353 C-F GUBBAY CJ
stated -
“At
common law, set-off or compensatio is a method by which mutual debts, being
liquidated and due, may be extinguished. It takes place ipso jure. If the debts
are equal, both are extinguished; if unequal, the smaller is discharged and the
larger is proportionally reduced. There are, however, two important exceptions
to the operation of the rule. A debt owed by one department of the State cannot
be set-off against a debt owed to another department. And set-off cannot be
raised against taxes due to the fiscus or where goods are sold for the benefit
of the State. See Schierhout v Union Government 1926 AD 286 at 291; Pentecost
& Co v Cape Meat Supply Co 1933 CPD 472 at 479; Voet Commentarius ad
Pandectus 16.2.16 (Gane's translation, Vol 3 at 166) van Leeuwen Censura
Forensis 1.4.36.11 and 13 (Barber and Macfayden's translation); WESSELS The Law
of Contract in South Africa 2ed vol II at paras 2567 and 2568; WILLES's
Principles of South African Law 8ed at 483. Both these exceptions are grounded
in public policy and utility. The first is designed to avoid confusion in State
accounts; the second is to ensure the uninterrupted flow of tax revenues to the
Treasury in the interests of good governance. In each instance, it is for the
State to decide whether or not set-off should apply even though the debts
co-exist.”
In casu,
the entities in respect of which set-off is being claimed are not strictu sensu
Government departments. They exist in terms of enabling statutes and are
completely separate personae in their own right. They each have Boards of Directors
which Boards are responsible for the management of each. In addition, set-off
is being claimed in respect of taxes owed to the fiscus. In my view, the
exceptions which operate against the right of set-off, as they relate to debts
owed and owing by Government departments, are pertinent to this dispute. The
applicant is clearly not in a position to legally claim set-off in the
circumstances and it is therefore my view that the applicant has not
established a prima facie right for the grant of an interim interdict.
