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GOVT, ERS VICTORY OVER TOBACCO COMPANY

30/09/2022 07:31:00 Mbongiseni Ndzimandze

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MBABANE – A full bench of the High Court has dismissed the application by British American Tobacco Swaziland (PTY), where it was among other prayers, seeking an order for the declaration of the Alcohol and Tobacco Levy Act of 2019 to be inconsistent with the Constitution.

In its judgment, the court said the applicant (British American Tobacco Swaziland (PTY) failed to satisfy it that the Act was irrational. The matter was heard by a full bench of the High Court, which comprised of Judges Mbutfo Mamba, Mzwandile Fakudze and Titus Mlangeni. The Bill was passed into law on August 23, 2019 and it provides for the imposition and collection of levy on alcoholic drinks and tobacco products. When the Bill was debated in June 2016, British American Tobacco Swaziland (BATS) submitted that the introduction of the levy would increase trade in illicit cigarettes, which was then estimated to account for 24-30 per cent of the local market. BATS estimated the government’s annual losses in revenue to illicit cigarette at E17 million.

BATS is a company incorporated and registered in Eswatini which markets and distributes British American tobacco products in the country through its partner, Ocean. These tobacco products comprise well-known global cigarette brands such as Dunhill, Pall Mall, Rothmans and Peter Stuyvesant. The company has operated in the country for more than 100 years. The tobacco products are manufactured in South Africa by British American Tobacco South Africa (BATSA) and imported to Eswatini by BATS. Respondents in the matter were the minister of Finance and the Commissioner General of then Swaziland Revenue Authority (SRA), now Eswatini Revenue Service (ERS).

Repay

The applicant, BATS, further wanted the court to direct ERS to repay it a sum of E6.3 million it purportedly paid as levies to the latter from August 23, 2019. The attorney general, who was the second respondent in the matter, however, argued that the company had no claim over the E6.3 million as it was money paid as levy by the consumers.Mduduzi Lokotfwako who is Director of BATS, submitted that the levy was defined as tax and was ‘levied and charged’ on both tobacco products manufactured and imported into Eswatini. The levy, according to Lokotfwako, is two per cent ‘taxable value’ for manufactured tobacco products, calculated as the total consideration paid in money and seven per cent of the taxable value for imported tobacco products, calculated as the sum of; the value of the goods ascertained for the purposes of customs duty plus the amount of customs duty, excise tax and other fiscal charges, other than Value Added Tax (VAT), payable on those goods.

Advocate Barry Roux who had been instructed by Senior Lawyer Sidumo Mdladla on behalf of the Commissioner General of ERS, submitted that the levy was not a customs duty or an excise duty. It was his contention that, therefore, the international agreements relied upon by the applicant did not have any relevance and the application must fail in this basis alone. He further highlighted that applicant’s application was premised on the contention that the international agreement (GATT agreement, SACU and the Protocol), were entrenched by the Constitution and were enacted into domestic law by Parliament, accordingly bind the government with the consequence that the Act, which purportedly violated the terms of the international agreement, was constitutionally invalid.

Roux contended that Section 238 (4) of the Constitution provides that an international agreement becomes law in Eswatini only when enacted into municipal (domestic) law by Parliament. It was further his averment that the international agreement had not been enacted into domestic law in Eswatini. The advocate told the court that, further, the applicant’s reliance on GATT must fail as according to the applicant’s own case, the GATT dealt with customs duty and the levy was alleged to be an excise duty.

“The SACU has not been enacted into domestic law, as an incorporation by reference to certain provision of the SACU in the Customs and Excise Act does not have the legal consequence that SACU was enacted into law by Parliament in Eswatini as contemplated by Section 238 (4) of the Constitution,” averred Advocate Roux. He argued that, even if SACU was enacted into law and the levy was found to be an excise duty, then the levy fell within the ambit of exceptions dealing with life and health in Eswatini.

Agreements

“Even if the intentional agreements apply, Section 61(1) of the Constitution, which include respect for international treaty obligations, makes its mandatory for government to promote and protect the interest of Eswatini,” he argued. In its judgment, the full bench said BATS did not show that the levy was in any way irregular or unlawful. “As already stated, this levy is a form of tax. That such tax or levy is perhaps too cumbersome on business, cannot be a reason to ground the averred contention that it amounts to denial of BATS’ right to carry out a trade or business freely in Eswatini. This point is also dismissed,” reads part of the judgment.

During the argument of the matter, BATS argued that the levy imposed on imports was an expropriation without compensation. The court said all sovereign states had a right to impose taxes on all entities doing business within their area of jurisdiction. The court said this was too plain to argue. It was the court’s observation that in the present case, the levy imposed in the Act was a form of tax. This tax, according to the court, was imposed on goods imported into the country by BATS. The court went on to point out that BATS was doing business in Eswatini and Parliament saw it fit to impose such levy on the imported goods.

“The importer could be any one beside BATS. Therefore, BATS has not been solely targeted for this taxation. The levy has, in this case, not been shown to be unlawful or in any way irregular. It is, therefore, illogical and untenable to argue that this was a form of expropriation of property without compensation and in contravention of Section 19(2) of the Constitution,” said the court. The court then dismissed the application in its entirety and BATS was ordered to pay costs of the application. The costs are to include the costs of counsel. The minister of Finance was represented by Assistant Attorney General Mbuso Simelane, while appearing for the applicant was Kenneth Motsa of Robinson Bertram.