The recent High Court decision in Omnia Fertilizer Zimbabwe (Pvt) Ltd v ZIMRA & Others [2024] ZWHHC 174 reaffirms the limits of judicial intervention in the face of ZIMRA’s statutory tax collection powers. The ruling reinforces the applicability of the “pay now, argue later” doctrine and provides clarity on when taxpayers may seek urgent court relief against garnishee orders issued before an objection is finalised.
Case Background
Between 2020 and 2022, Omnia submitted tax returns and remitted its tax payments in Zimbabwean dollars despite part of its trade taking place in foreign currency. ZIMRA disputed this and insisted that the company pays part of its tax in foreign currency. Despite Omnia’s objection to the assessments and request for suspension of collection under s69 of the Income Tax Act, ZIMRA rejected and proceeded with garnishee orders to several of Omnia’s banks to recover US$3.9 million. In response the company approached the High Court on an urgent basis, seeking to block ZIMRA from proceeding with collections while the matter was still under review.
Court’s Reasoning and decision
The Court held that lodging of an objection or initiation of legal proceedings does not, in itself, suspend an assessed tax liability. In terms of section 69(1) of the ITA, an assessment remains enforceable unless the Commissioner issues a directive to suspend collection, and none was issued in this instance. Accordingly, the garnishee orders were held to be a lawful and procedurally valid exercise of powers under section 58. The Court found no requirement for prior judicial approval before ZIMRA enforces payment, noting that garnishee action in the presence of an undisputed debt is a legitimate tool of revenue collection. It further held that any challenge to the legal foundation of the assessments must follow statutory procedures, including objection and appeal to the Fiscal Appeals Court. An application for urgent interdictory relief was deemed an improper substitute for these internal remedies. The application was struck off the roll.
Decision Impact
Taxpayers remain obligated to pay assessed amounts unless the Commissioner General grants a suspension under section 62 or a formal payment plan is approved. ZIMRA has unrestricted powers to demand payment once a valid assessment has been issued, even where an objection or appeal is pending. The High Court will not entertain premature challenges unless it is shown that ZIMRA acted irrationally or unfairly, exceeded its powers, committed an error of law or a breach of natural justice when exercising its collection powers. With ZIMRA’s current aggressive enforcement, assessments once raised are being immediately enforced, with a minimum of 30% demanded upfront and an increase in garnishee orders. Payment plans are increasingly being rejected. Where a case of genuine financial constraint exists, early engagement with ZIMRA is critical.