Luanshya peasant farmer wins tax dispute case against ZRA

Luanshya peasant farmer Abson Sakala has won a tax dispute case against the Zambia Revenue Authority (ZRA) which was brought before the Fraser Chishimba chaired Tax Appeals Tribunal.

In this case, Mr. Sakala, 61, a retired miner, complained that ZRA overtaxed him on an imported vehicle that was damaged in transit in a road accident on the Tanzanian side before being cleared at Nakonde Border in April 2021.

In the judgement delivered over the weekend, the Tax Appeals Tribunal reduced the taxes Mr. Sakala is to pay for the damaged vehicle to K5,000.00 from the K13,860.40 charged by ZRA.

The tribunal ruled that Mr. Sakala must pay the K5,000.00 within 30 days from the date of the Judgement delivered on 3rd February, 2023 and that in case of default, the motor vehicle, or what is left of it shall be auctioned off.

The Tribunal established that ZRA breached Section 86(2)(b) of the Customs & Excise Act when assessing the value of the damaged vehicle.

Meanwhile, the Tribunal has since urged ZRA to show more empathy and to be more humane in the treatment of citizens as it sets out to collect the much needed revenue for the Treasury, especially the senior ones.

The Tribunal has granted ZRA Leave to Appeal.

“We heard the appeal at Ndola on 6thDecember 2022. At the hearing the Appellant appeared in person and presented his case. He relied on his Notice of Appeal and the supporting Affidavit filed into the Tribunal. He pleaded that the motor vehicle was a gift from his son to help him in his locomotion logistics as a retiree. The money to pay for Customs and other import charges and expenses that had been budgeted for was swallowed by the unfortunate accident expenses he went through. That he understood that it is the duty of every Zambian citizen to pay Customs Duty on importation of items in the country and as such he was not expecting to be excused. All he was appealing to the Tribunal was to pay a lesser amount than the assessment sum of ZMW13,860.40 the Respondent was insisting on despite his dire personal circumstances. To that extent he was offering something between ZMW3,500.00 to ZMW4,000.00. The cost of transporting the damaged vehicle from Nakonde to Luanshya was in the range of ZMW30,000 and if he was forced to pay the ZMW13,860.40, it would be an impossible feat for him. He pleaded that he is a law-abidingcitizen and despite persuasions and promptings from other people in Nakonde to go “Zalewa”, (a local parlance to mean smuggling) he still opted to follow the correct import channels as by law established. He left his fate in the hands of the Tribunal,” read part of the judgement.

“On the other hand, the Respondent called one witness RW1, one Martin Mageza Chanda, employed as a Senior Collector in the Customs Services Division of the Respondent. His testimony was a recitation of his Affidavit sworn on the 30th day of September 2022 and filed into the Tribunal on even date and whose facts we have cited above. The nub of his testimony was essentially that the Respondent accommodated the Appellant’s pleas by using the barest minimum value to feed into the ASYCUDA System (hereinafter called ASYCUDA) which the Respondent has deployed to process entries at all its ports of entry into Zambia, and as such Nakonde Port was no exception. The barest minimum used was United States Dollars One, USD$1.00 and no zero value could be accepted by ASYCUDA. According to RW1, the sum of ZMW13,860.40 was the taxes due upon entry of the USD$1.00 value. The Respondent gave opportunity to the Appellant to pay this figure in 60 days.At the end of the hearing, the parties did not opt to file any written submissions but decided to rely on both the Affidavit evidence filed and the oral testimony given,” the judgment continued.

The tribunal observed from the conduct of the ZRA (Respondent’s) Officers that they shifted the statutory burden of placing value of an imported item on to Mr. Sakala (Appellant).

“We have observed from the conduct of the Respondent’s Officers that they shifted the statutory burden of placing value of an imported item on to the Appellant as is evident by exhibit “MMC7” being letter dated 3rd August 2021 at paragraph 3 item 2, where the Deputy Commissioner –Support demanded from the Appellant to produce “A valuation report from the insurance company which was responsible for the insurance during the period the motor vehicle was in transit”. We observe that under Section 86 of the Customs & Excise Act, the Commissioner-General has a discretion to amend a self-assessment declared by an importer if he so considers but much more importantly, must, under Section 86(2)(b) give, in the words of the statute, and we quote, “the basis for the amended assessment”.In other words the Commissioner-General makes the ultimate decision on a declared value but must do so with firm reasons. We have however observed with concern that much as the Respondent exercised its statutory discretion to amend the various assessments it issued, which power it has, the handling of the matter both generally and specifically evinces a lack of a firm basis upon which the assessment was being adjusted apart from a shift downwards of the assessments each time the Appellant appealed to it.”

The Tribunal further stated it was strange how an imported article of a value of ZMW20.00 could turn out into a nightmare of ZMW13,860.40.

“We find this conduct to be in breach of Section 86(2)(b) of the Customs & Excise Act in that there was never a basis for the amended assessments apart from the general recognition of an accident damaged article. The Respondent ought to have gone further to establish a firm basis as to the residual value of the vehicle upon which taxes would have been applied. The matter does not end here. According to RW1, when the Respondent opted to choose the USD$1.00 as the basis for assessment, ASYCUDA WORLD returned a value of ZMW13,860.40 as Customs Duty payable. RW1 did not tell the Tribunal how and what factors ASYCUDA WORLD takes into account to calculate Customs Duty, especially in this matter. No evidence was led whatsoever. USD$1.00 in April 2021 was equivalent to circaZMW20.00. It defies logic as to how an imported article of a value of ZMW20.00 could turn out into a nightmare of ZMW13,860.40!”

“We consider that we are at large as there are ample doubts and questions surrounding the final assessment by the Respondent to have it Set Aside, which power we have. We accordingly Set Aside the assessment and substitute it for the sum of ZMW5,000.00 which must be paid within 30 days from the date of this Judgement. In case of default, the motor vehicle, or what is left of it shall be auctioned off. In passing, we take opportunity to urge the Respondent to show more empathy and to be more humane in the treatment of our citizens as it sets out to collect the much needed revenue for the Treasury, especially the senior ones. In this matter, what started out as an innocuous gift from a son ended up being a regrettable experience for the Appellant. We accordingly allow the appeal with costs to the Appellant to be agreed in default to be taxed. The costs shall be on Out-of-Pocket Expenses basis only as the Appellant was unrepresented. Leave to Appeal is hereby granted,” the judgment concluded.

The Tax Appeals Tribunal is a statutory institution under the Ministry of Finance and National Planning that hears grievances relating to tax matters regarding decisions made by the Zambia Revenue Authority.