Marvelous Tapera 
A fundamental reason for the existence of the rules of prescription in tax law is to provide taxpayers with certainty regarding their tax position.
There has been an upsurge of re-opening of assessments after the prescription period by the Zimbabwe Revenue Authority (Zimra) and the court has extensively decided on this matter in recent times.
The increase in prescription related disputes calls for the need to reassess the prescription provisions and ensure that a balance is struck between the interests of the taxpayer and those of the Zimra.
While the burden of proof lies with the Commissioner General on why it is justified to re-open a prescribed assessment, the taxpayer stands a chance to win the case if they have sufficient documentary evidence.
This can be in the form of books of accounts which reflect the income earned by the taxpayer and substantiate any deductions, credits exemptions or tax rebates claimed by a taxpayer, which in turn yield the tax liability of a taxpayer.
The prescription clause in terms of section 47 of the Income Tax Act allows the Commissioner General to reopen an assessment if she is satisfied that there was fraud, misrepresentation and wilful non-disclosure.
Although the terms fraud, misrepresentation or wilful non-disclosure are not defined in the taxes law, misrepresentation is generally defined as a factual statement concerning a certain state of affairs but is not true.
Although prescription could be used as a strong defence for taxpayers in disputes, the trend in recent court decisions show that the meaning attributed to “misrepresentation” is so broad.
It leaves taxpayers with no recourse if there was any incorrect submission regardless of their state of mind.
This is problematic in that it has brought uncertainty for taxpayers because it appears any assessment can be re-opened at any time.
It is critical to note that in a case of lifting of the prescription veil, the onus is on the Commissioner to prove that a misrepresentation has been made by a taxpayer. An allegation of misrepresentation cannot be made in a vacuum and then place the burden on the taxpayer to prove non-liability.
A misrepresentation is not defined in the taxes law neither is fraud nor wilful non-disclosure.
In the case of CSARS v Brummeria Rennaissance (Pty) Ltd 69 SATC it was held that “while it is in the public interest that the Commissioner should collect tax, it is also in the public interest that disputes should come to an end and it would be unfair to an honest taxpayer if the Commissioner were to be allowed to continue to change the basis upon which the taxpayer were assessed until the Commissioner got it right-memories fade, witnesses become unavailable, documents are lost”.
It follows therefore, that there is need to strike a balance so as to ensure that both parties are justly treated at law.
The circumstances calling for opening up of the prescription period, being “fraud, misrepresentation or wilful non-disclosure of facts” are acts bordering on criminality such that if the Commissioner is to go beyond the prescription period, she must be satisfied beyond reasonable doubt that indeed the act justifying opening of the prescription period indeed happened.
While the prescription period can well be used as a strong defence by compliant taxpayers, the same cannot be used by non-compliant taxpayers particularly those engaging in tax evasion as the law will not favour them.
In a recently held cases such as DEB v Zimra, Bath V Zimra and SZ v Zimra the courts went at length to describe the meaning of misrepresentation in tax cases.
Importantly, the courts have held that the state of the mind of the taxpayer is not important what is important is that the taxpayer did not pay the correct amount of tax.
In other jurisdictions, misrepresentation is qualified as being either, negligent, wilful or innocent misrepresentation.
This gives room for the exoneration of taxpayers who innocently misrepresent while coming heavy handed on those that wilfully or negligently misrepresent their tax status.
This is also the position with common law. In Zimbabwe, however, the courts have reinstated that the legislature’s intention is to ensure that the correct tax is remitted and the fiscus does not lose out that is why the state of the taxpayer’s mind is not included.
It is our view that the meaning of misrepresentation is too open-ended and leaves the taxpayer with very minimum recourse, particularly innocent taxpayers who would have made genuine mistakes.
This goes against the principle of certainty because an assessment can be re-opened at any time and the Zimra can easily discharge the onus on the basis of misrepresentation which is a very wide concept.
While we wait for a revision of the meaning of “misrepresentation” taxpayers should retain all documentation even beyond the prescribed six-year period because an assessment can be reopened even after the said prescription period.
Meanwhile, Matrix Tax School is hosting Monthly Tax Updates webinar on the 8th of October 2020 from 10am-12pm to keep you informed on local and international tax developments. More details on the webinars are accessible at http://www.matrixtaxschool.co.zw/monthly-tax-update-webinars/
● Tapera is the Founder of Tax Matrix (Pvt) Ltd and the chief executive of Matrix Tax School. He writes in his personal capacity.
