LEGAL think tank Veritas has said Finance minister Mthuli Ncube, who recently exempted Chinese telecommunications giant Huawei Technologies from paying income tax, has no jurisdiction to backdate tax.
Two weeks ago, Ncube gazetted two statutory instruments which backdate Huawei Technologies exemption from paying tax to December 2009.
“This is in line with a 2014 “framework agreement” entered into by the government with the Export-Import Bank of China for the financing of infrastructure modernisation projects using equipment provided by Huawei.
“The agreement stated that Huawei would be given exemptions from income tax and refunds of Value Added Tax (Vat).
Veritas, however, argues the agreement between the government and the Export-Import Bank of China does not provide for backdating tax exemptions.
“There is nothing in the paragraph, nor in any other provision of the Act, that says the minister’s approval can be backdated,” said the legal think tank, adding that only Parliament has the power to do retrospective legislation.
“It is therefore a rule of law that only Parliament has the power to legislate retrospectively or to authorise the making of retrospective statutory instruments – and if it does authorise them, it must do so in the clearest terms.
“Hence ministers cannot make retrospective statutory instruments unless the Act under which the instruments are made clearly authorises them to be made.”
Veritas said while the Vat Act empowers the Zimbabwe Revenue Authority (Zimra) Commissioner-General to refund Vat paid by the foreign company or anyone with an agreement with government, it does not authorise goods or services to be paid retrospectively.
The think tank added that retrospective legislation does not inspire confidence.
“The law is wary of back-dated or retrospective legislation, for at least two good reasons.
“The law must be certain. People should be able to conduct their lawful business without fearing that the law will be changed retrospectively so that their lawful business is rendered unlawful.
“All four SIs mentioned in this bulletin are invalid, as we have said.
“The consequences of this cannot be assessed properly because the minister has not explained why it was necessary to make the statutory instruments retrospective – why, in other words, they were not published as soon as the framework agreement was concluded in August 2014.
“The only way forward now is for the minister to go to Parliament and try to secure the passage of a Bill giving Huawei the exemptions and refunds to which it is entitled under the framework agreement,” Veritas said.