Whether ZIMRA is
legally entitled to issue garnishee orders for the payment of taxes assessed as
being due and owing.It
was contended, on behalf of ZIMRA, that the court a quo deviated from the cause
of action as pleaded by Packers and gave relief framed on alleged
unreasonableness on the part of ZIMRA which was ...
Whether ZIMRA is
legally entitled to issue garnishee orders for the payment of taxes assessed as
being due and owing.
It
was contended, on behalf of ZIMRA, that the court a quo deviated from the cause
of action as pleaded by Packers and gave relief framed on alleged
unreasonableness on the part of ZIMRA which was raised by the court mero motu.
It was contended further that if the court a quo had confined itself to the
lawfulness of the conduct of ZIMRA, it would have correctly found that the
actions of the latter were lawful, and, consequently, it would have declined
the prayer to issue the interdict.
The
Value Added Tax Act [Chapter 23:12] provides a detailed mechanism for vendors
to keep certain records and to periodically calculate, account for and pay
value added tax to the Commissioner. The
Value Added Tax Act [Chapter 23:12], as a whole, and, in particular, its
provisions relating to assessments and the payment recovery and refund of tax
provisions found in Part VII of the Value Added Tax Act [Chapter 23:12] are
indispensable tools for the prompt collection of tax due. From an economic
point of view, the provisions of the Value Added Tax Act [Chapter 23:12] are
meant to ensure a steady, accurate and predictable stream of revenue for the
fiscus.
These
provisions are an embodiment of the principle “Pay Now Argue Later”, suggesting
that an appeal would not have the effect of suspending payment. The principle
is aimed at discouraging frivolous or spurious objections and ensures that the
whole system of tax collection in the country maintains its efficacy. This
serves the fundamental public purpose of ensuring that the fiscus is not
prejudiced by delay in obtaining finality in any dispute. I examine hereunder
the principal provisions.
Section 6
of the Value Added Tax Act [Chapter 23:12] provides:
“Subject
to this Act, there shall be charged, levied and collected, for the benefit of
the Consolidated Revenue Fund a tax at such rate as may be fixed by the
Charging Act on the value of -
(a)
The supply by any registered operator of goods or services supplied by him on
or after the 1st January, 2004, in the furtherance of any trade
carried on by him.
(b) …,.
not relevant.”
Payment
of tax under the relevant Act is provided for in terms of section 28 of the Value
Added Tax Act [Chapter 23:12] which reads:
“28
Returns and payments of tax
(1)
Every registered operator shall, within the period ending on the twenty-fifth
day of the first month commencing after the end of a tax period relating to
such registered operator or, where such tax period ends on or after the first
day and before the last day of a month, within the period ending on such last
day -
(a) Furnish the Commissioner with a
return in the prescribed form reflecting such information as may be required
for the purpose of the calculation of tax in terms of section 15; and
(b) Calculate the amounts of such tax
in accordance with the said section and pay the tax payable to the Commissioner
or calculate the amount of any refund due to the registered operator.
[Subsection
substituted by Act 5 of 2009 and amended by Act 10 of 2009, by Act 3 of 2010,
by Act 5 of 2010 and by Act 9 of 2011] (1a)…,. [Subsection repealed by Act 5 of
2009]
(2)
Every registered operator who is registered in terms of Part IV shall within
the period allowed by subsection (1) of this section furnish the return
referred to in that subsection in respect of each tax period relating to such
registered operator, whether or not tax is payable or a refund is due in
respect of such period.
(3)
The Commissioner may, having regard to the circumstances of any case but
subject to section thirty-eight,
extend the period within which such return is to be furnished or such tax is to
be paid.”
Section
27 of the Value Added Tax Act [Chapter 23:12] sets out four categories of
operators and tax periods for the submission of returns and payment of assessed
VAT by the operator are then regulated according to the category of the respective
operators. Tax periods for the four categories range from one calendar month to
two, or such other period as may be approved by the Commissioner in relation to
category D.
The
anchor to the provisions on recovery of tax is section 36 of the Value Added
Tax Act [Chapter 23:12] which excludes the suspension of payment of tax upon
the noting of the appeal. Section 36 of the Value Added Tax Act [Chapter 23:12]
provides, in relevant part:
“36
Payment of tax pending appeal
The
obligation to pay and the right to receive and recover any tax, additional tax,
penalty or interest chargeable under this Act shall not, unless the
Commissioner so directs, be suspended by any appeal or pending the decision of
a court of law, but if any assessment is altered on appeal or in conformity
with any such decision or a decision by the Commissioner to concede the appeal
to the Fiscal Appeal Court or such court of law, a due adjustment shall be
made, amounts paid in excess being refunded with interest at the prescribed rate
(but subject to section forty-six)
and calculated from the date proved to the satisfaction of the Commissioner to
be the date on which such excess was received, and amounts short-paid being
recoverable with penalty and interest calculated as provided in subsection (1)
of section thirty-nine.”
The
learned judge construed the provision in question thus:
“My
reading of s36 is that the liability to pay remains extant until the appeal is
finalised or in the alternative, unless the Commissioner directs that the
obligation to pay falls away until the pending appeal is finalised. Applicant in this matter has not argued
that the effect of the noting of the appeal is to extinguish its obligation to
pay. Section 33 of the VAT Act provides for the circumstances in which
an aggrieved person can appeal to the Fiscal Appeals Court against the exercise
of discretion by the Commissioner. The right to appeal against the exercise of
discretion by the respondent's officers to the Commissioner is provided for in
terms of s32 of the VAT Act.”…,.
Packers
lodged an objection in terms of section 32 of the Value Added Tax Act [Chapter
23:12] and when the objection did not wholly succeed it filed an appeal - after
the garnishee order had been placed against its account. The learned judge
found that although Packers was challenging the appointment of an agent by the
Commissioner to collect the VAT assessed as being due and owing, ZIMRA had
acted lawfully in relation to the appointment of FBC Bank as such agent for the
collection of tax. In considering this issue, the court a quo, in my view correctly, came to this
conclusion:
“This
obligation, on the part of the appointed agent, is not subject to any other law
except s48. Section 48 overrides anything that is contrary to it which may be
set out in any other law.”
In
my view, the issue of the appointment of the agent and the garnishee order are
intrinsically linked and the law in respect to the two is critical in the
resolution of this inquiry. Section 48 of the Value Added Tax Act [Chapter
23:12] provides as follows:
“48
Power to appoint agent
(1) For
the purpose of subsection (2) - “person” includes -
(a) A bank, building society or
savings bank; and
(b) A partnership; and
(c) Any officer in the Public Service;
and
(d) Any prescribed person in relation
to a prescribed service.
(2)
The Commissioner may, if he thinks it necessary, declare any person to be the
agent of any other person, and the person so declared an agent shall be the
agent of such other person for the purposes of this Act, and, notwithstanding
anything to the contrary contained in any other law, may be required to pay any
amount of tax, additional tax, penalty, or interest due from any moneys in any
current account, deposit account, fixed deposit account or savings account or
any other moneys -
(a) Including pensions, salary, wages
or any other remuneration, which may be held by him for, or due by him to, the
person whose agent he has been declared to be; or
(b) That the person so declared an
agent receives as an intermediary from the other person.”
Thus,
the sharp end of the VAT system is section 48 of the Value Added Tax Act
[Chapter 23:12] which allows the appointment of an agent. In a proper and
logical construction of the provision, payment by the agent is by means of a
garnishee against any account to the taxpayer's credit held with the agent.
In
any event, tax under the Value Added Tax Act [Chapter 23:12] consists of monies
that have been taxed on goods and services paid by consumers for onward
transmission to the Commissioner. All that is required of an operator is to
calculate the amount so paid, submit a return and make payment. A refusal to pay, or failure to do so, on the
part of the operator would result in the imposition of a garnishee. Therefore,
once the tax assessment was made, the imposition of the garnishee was a
possibility.
In
my view, no other conclusion is possible. (This finding by the court ought to
have put paid to the enquiry into the lawfulness of the garnishee).
Packers
had alleged before the court a quo that the garnishee imposed a hardship on its
operations.
In
my view, section 36 of the Value Added Tax Act [Chapter 23:12] creates a remedy
for the amelioration of possible financial hardship faced by an individual
taxpayer and allows the Commissioner to suspend payment pending an appeal.
However, the Commissioner cannot exercise the discretion mero motu. He can only
do so upon consideration of facts presented to him by a taxpayer who wishes to
benefit from the exercise of discretion by the Commissioner. As a consequence,
the taxpayer bears the onus to place the necessary facts before the
Commissioner regarding the hardships facing him should the obligation to pay
not be suspended. For, as stated by the learned DEPUTY CHIEF JUSTICE in the
case of Mayor Logistics (Pvt) Ltd v ZIMRA SC7/14:
“As
the facts on which the Commissioner would exercise the discretion would be
within the exclusive knowledge of the taxpayer he or she must place them before
the Commissioner.”
It
follows, therefore that, whilst section 48 of the Value Added Tax Act [Chapter
23:12] is concerned with the Commissioner's power to appoint an agent for
purposes of collection or recovery of tax, section 36 of the Value Added Tax
Act [Chapter 23:12] enshrines the taxpayer's duty to pay tax. The two are
inextricably linked in that the decision to use one method of recovery is
determined by whether or not any facts have been placed before the Commissioner
on whether or not there exist hardships which would justify a suspension of the
obligation to pay assessed tax by a taxpayer. What was before the court a quo
was a plea for mercy as opposed to the enforcement of an existing right. Once the discretion in section 36 of the Value
Added Tax Act [Chapter 23:12] is exercised in favour of the suspension of the
obligation to pay tax, then by parity of reasoning, it follows that the
discretion to appoint an agent in terms of section 48 of the Value Added Tax
Act [Chapter 23:12] falls away.
The
obligation to pay the amount of tax assessed as being due and payable is
imposed by section 38 of the Value Added Tax Act [Chapter 23:12]. In
considering the VAT collection system in general the following observations
emerge. Section 36 of the Value Added Tax Act [Chapter 23:12] does not serve to
protect any right of the taxpayer but to preserve the right of the Commissioner
to be paid and to collect the revenue. It also secures the obligation of the
operator to pay unless such obligation is suspended by the Commissioner upon
request. As a consequence, the discretion to suspend payment in terms of the
said section is that of the Commissioner. In Mayor Logistics (Pvt) Ltd v ZIMRA
SC7/14 his Lordship, MALABA DCJ, had this to say:
“Failure
to fulfil an obligation [to pay tax] may be due to a variety of circumstances.
The legislature decided to place responsibility for deciding whether or not the
particular circumstances of a taxpayer entitle him or her to a directive
suspending the obligation to pay the assessed tax on the Commissioner. A court
of law would be acting unlawfully if it usurped the powers of the Commissioner
and ordered a suspension of the obligation on a taxpayer to pay assessed tax
pending the determination of an appeal by the Fiscal Appeals Court.”
It
is not in dispute that the court a quo made a finding that the actions of ZIMRA
were lawful. As a consequence, it should have been obvious that there was no
legal basis upon which to grant an interdict. Section 48 of the Value Added Tax
Act [Chapter 23:12] is not subject, or subservient, to any other law. This is
clearly expressed in the provision itself. It is my conclusion, therefore, that
in terms of the wording of the section, the Commissioner's power under section
48 of the Value Added Tax Act [Chapter 23:12] cannot be subject to section 14
of the Fiscal Appeal Court Act. Once a person is declared an agent in terms of
section 48 of the Value Added Tax Act [Chapter 23:12] the person so appointed
is duty bound to pay the assessed taxes notwithstanding the provisions of any
other law.
As
a consequence, it follows that ZIMRA is entitled not only to appoint an agent
for the collection of assessed tax, it is also entitled to garnishee the
taxpayer's account through the agent for the collection of tax. The decision by
the court a quo to discharge the garnishee in the circumstances of this case
was contrary to the law and constitutes a misdirection.