CW v Commissioner of Taxes 1988 (2) ZLR 27 (HC): State could not erode compensation by taxing it. Reasonable justification in a democratic society.
The appellant company had acquired shares in a number of South African companies. These shares were external securities traded on the Zimbabwe Stock Exchange. Trading on the Zimbabwe Stock Exchange in external securities was suspended and two weeks later an amendment was promulgated to the Exchange Control Regulations allowing the Reserve Bank to acquire compulsorily external securities. The appellants external shares were acquired in this way and a sum of compensation was offered. In the same year, 1984, an amendment was made to the Capital Gains Tax Act exempting from capital gains tax amounts received as compensation for shares compulsorily acquired under the Exchange Control Regulations. In 1985 a further amendment was made to the Act, withdrawing the exemption in respect of holders of foreign securities who had contested the adequacy of the compensation payable.
Held that there is a general presumption in interpreting statutes against retroactivity, unless the statute so provides clearly or by necessary implication. Although the amendment had a discriminatory affect this was not one of the forms of discrimination prohibited by s23 of the constitution, which prohibits discrimination on the basis of race, tribe, place of origin, political opinions, colour or creed. Person alleging constitutionality must establish it as not reasonably justifiable in a democratic society.
It could never have been intended that, once adequate compensation had been paid to a person, the state could erode the compensation by taxing it. Nor could such a provision be justified as being reasonably justifiable in a democratic society in terms of s16(7) of the constitution, as it effectively penalizes persons who sought to have their constitutional rights tested in the courts. The amendment was therefore unconstitutional.
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