CHIWESHE
JP: The applicant carries on business as
a transport operator. During the months
of November 2008, December 2008 and January 2009 the applicant availed to its
employees fuel coupons and food hampers as part payment of remuneration due to
them.
Following an audit of the
applicant's business by the respondent in June 2009, the respondent wrote to
the applicant's accountants contending that the fuel coupons and food vouchers
should be treated as remuneration in foreign currency and that PAYE in respect
thereof should have been paid by the applicant in foreign currency. The applicant contended that the issuance of
fuel coupons and food hampers cannot as a matter of law be regarded as
remuneration in foreign currency. The
applicant had in fact for the period under consideration paid employee tax in
local currency.
The parties are unable to agree on
the correct interpretation of the relevant provisions of the Income Tax Act [Cap 23:06]. In order to safeguard its interests the
applicant has filed the present papers seeking a declaratory order in the
following terms:
“IT BE AND IS HEREBY DECLARED:
That the receipt
by applicant's employees of fuel coupons and food hampers during the months of
November 2008, December 2008 and January 2009 cannot be treated as remuneration
in foreign currency, and that therefore PAYE in respect thereof was not payable
in foreign currency as provided for in paragraph 3 (1) (a) of the 13th
Schedule to the Income Tax Act [Cap 23:06]”
The respondent opposes this
application on the basis that since it is common cause that the applicant
obtained the fuel coupons and food hampers using foreign currency and that the
employees would in turn redeem same on the market in the form of foreign
currency, PAYE, it stands to reason, should be paid in foreign currency.
Alternatively, argues the
respondent, the payment of remuneration in the form of fuel coupons and food
hampers was a scheme aimed at avoiding the payment of tax in foreign currency
as envisaged in section 98 of the Income Tax Act [Cap 23:06]
In terms of para 3 (1 a) of the 13th
Schedule to the Income Tax Act where remuneration from which employees' tax is
required to be withheld is wholly or partly remuneration paid in foreign
currency, the employer must remit PAYE thereof in foreign currency.
Remuneration paid in foreign currency is defined in the same schedule as
“remuneration paid in United
States dollars or Euros or any other
currency denominated under the exchange control (general) order”. Thus far the parties are agreed as to the
import of these clear and unambiguous provisions of the 13th
Schedule to the Act.
Thereafter the respondent loses the
plot by attempting to supplement and expand the definition of “remuneration
paid in foreign currency” as he does in his opposing affidavit and heads of
argument. Para
1.5 of the respondent's heads of argument reads:
“1.5 Unfortunately
this definition is not revealing anything as it is defining remuneration using
the same word remuneration. For one to
determine what remuneration paid in foreign currency really is, one has
to look for the general definition of remuneration. Remuneration is defined as “any amount of
income which is paid or payable by way of any salary, leave pay, allowance,
wage, overtime pay, bonus, gratuity, commission, fee emolument, pension,
superannuation allowance, retiring allowance, stipend or communication of
pension or an annuity, whether in cash or otherwise and whether or not in
respect of services rendered, including any amount referred to in paragraph
(a), (b), (c ) or (f) of the definition of “gross income” in subsection (1) of
section 8”. (own underlining)
The respondent further avers under
para 1.6 of his heads of argument as follows:
“1.6 . Amount is then defined in section 2 of the
Act as 'for the purposes of the provisions of this Act relating to the
determination of the gross income or taxable income as defined in subsection 1
of section 8, of a person, means-
(a)
money
(b)
Any other property, corporeal or incorporeal having
ascertainable money value and “accrued”, “paid”, “received” or any cognate
expression shall, in so far as it applies to an amount as defined in paragraph
(b), be construed in a sense correlative with that in which it is construed
when it applies to money.”
After
this irrelevant analysis the respondent then concludes and substitutes the
definition given by the legislature, with his own, as follows;
“1.7. From this analysis it is submitted that the final
definition of remuneration paid in foreign currency will be money or any other
property, corporeal or incorporeal, having ascertainable money value, paid in United States
dollars or Euros or any of the designated currencies to an employee by way of a
salary, wage, etc.”(own underlining)
Using this newly found definition of
“remuneration in foreign currency” the respondent then proceeds to show how
PAYE in respect of the applicant's employees would have been calculated. If the legislature had intended this expanded
definition it would have legislated accordingly, in so many words. As it was then the definition restricted
“remuneration paid in foreign currency” to payment in foreign currency. It did not include payment in kind even if
such kind might have been acquired by the employer using foreign currency or
redeemed by the employee in foreign currency. I would find in favour of the
applicant in this regard.
The respondent's argument however
makes attractive policy propositions upon which the legislature could act. Indeed the legislature has since acted in
line with the respondent's propositions by way of amendments to the Finance Act
effective from 1 January 2009. These
amendments do not have retrospective effect.
It appears to me that in
interpreting tax legislation, one must give effect strictly to the words used
by the legislature. In Loewenstein v COT 1956 (4) SA 772 LORD
KEASUS had this to say by way of dictum:-
“I am not all
sure that in a case of this kind – a fiscal case – form is not amply
sufficient, because as I understand the principle of all fiscal legislation it
is this: if the person sought to be
taxed comes within the letter of the law, he must be taxed, however great the
hardship may appear to the judicial mind to be.
On the other hand, if the crown, seeking to recover the tax, cannot
bring the subject within the letter of the law, the subject is free, however
apparently within the law the case might otherwise appear to be. In other words, if there be an equitable
construction, certainly such a construction is not admissible in a taxing
statute, where you can simply adhere to the words of the statute”
And
in another dictum in Cape Brandy Syndicate v IRC 1921 (1) KB 64
it was
stated;
“In a Taxing Act
one has to look merely at what is clearly said.
There is no room for any intendment.
There is no equity about a tax. There
is no presumption as to a tax. Nothing
is to be read in common nothing is to be implied. One can only look fairly at the language used”.
The respondent has argued in the
alternative that the applicant's conduct in paying remuneration in the form of
fuel coupons and food hampers amounts to a scheme aimed at avoiding the payment
of tax in foreign currency. Having
interpreted the definition of “remuneration paid in foreign currency”
restrictively, it follows that the applicant was not under any obligation to
remit PAYE in foreign currency.
Accordingly, the applicant could not have hatched a scheme to avoid a
tax that was not payable in the first place.
I would absolve them in that regard.
In the final analysis the applicants
are entitled to the order they seek.
Accordingly it
is declared as follows:
That the receipt
by the applicant's employees of fuel coupons and food hampers during the months
of November 2008, December 2008 and January 2009 cannot be treated as
remuneration in foreign currency, and that therefore PAYE in respect thereof
was not payable in foreign currency as provided for in para 3 (1) (a) of the 13th
Schedule to the Income Tax Act [Cap 23:06].
Wintertons, applicant's legal practitioners
Kantor & Immerman, respondent's legal practitioners
