Heywood Haulage Investments Central Africa (Pvt) Ltd v The Commissioner General

HH 81-11
                                                                               HC 5030/09
HEYWOOD HAULAGE INVESTMENTS
CENTRAL AFRICA (PVT) LTD
versus
THE COMMISSIONER GENERAL


HIGH COURT OF ZIMBABWE
CHIWESHE JP
HARARE, 5 October 2010 and 30 March 2011


Mr P.C. Paul, for the applicant
Mr A.B.C. Chinake for the respondent


       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
2
HH 81-11
HC 5030/09

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.”
                                                                                               3
                                                                                       HH 81-11
                                                                                      HC 5030/09


        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;
4
HH 81-11
HC 5030/09

       “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 13 th Schedule to the
Income Tax Act [Cap 23:06].




Wintertons, applicant’s legal practitioners
Kantor & Immerman, respondent’s legal practitioners