25 January 2013

Namibia: Cement Tax Dispute Goes to Supreme Court

THE attorney general has decided to refer a dispute about the legality of the import duty that is supposed to serve as an infant industry protection measure for cement manufacturer Ohorongo Cement to the Supreme Court.

A settlement agreement including this undertaking by the attorney general was made an order of the court by Acting Judge Esi Schimming-Chase in the High Court in Windhoek on Wednesday.

The settlement agreement was reached between lawyers representing a Chinese-owned cement importer, Jack's Trading CC, and the minister of finance and commissioner for customs and excise, and was made a court order over objections from senior counsel Raymond Heathcote, representing Ohorongo Cement.

Heathcote tried in vain to persuade the court to first allow Ohorongo Cement to intervene in the latest case between Jack's Trading and the Minister of finance.

In light of the agreement Jack's Trading CC withdrew its latest urgent application in which it was asking the High Court to declare the cement import duty, as decided and announced by the minister of finance invalid and unlawful and to set the import tax aside.

Jack's Trading CC is claiming that the correct procedure, as set out in the Customs and Excise Act, was not followed when the import duty was introduced last year.

The import duty requires cement importers to pay a tax of 60 percent on imported from 2012 to 2014, where after the import tax rate would be lowered to 54 percent in 2015, 42 percent in 2016, 24 percent in 2017, and 12 per cent in 2018.

The import duty is meant as an infant industry protection measure for Namibia's only cement manufacturer, Ohorongo Cement, which has invested more than N$2,2 billion in Namibia to set up a cement plant between Otavi and Tsumeb.

Jack's Trading first struck a blow against the import duty in the High Court at the end of August last year, when a notice in which the finance minister announced the import duty was declared unlawful and set aside.

However, it later transpired that the notice, dated July 27 last year, which was declared unlawful was not the one which had actually been published in the Government Gazette on August 15.

As a result of that twist in the matter, the import duty remained in place.

Since then, Jack's Trading has under protest been paying millions of dollars in import duty to the Ministry of Finance, the High Court was informed in the close corporation's latest urgent application.

A notice in which the minister of finance announced that she had tabled a taxation proposal on the cement import duty in the National Assembly on April 18 last year was published in the Government Gazette on August 15.

Jack's Trading is continuing to argue that this was the wrong sequence of steps in introducing the cement import tax. The close corporation is arguing that, in terms of the Customs and Excise Act, the notice in the Government Gazette should have been published first, and that the finance minister then had to table the notice in the National Assembly within 21 days after that, and that the notice would have had to remain on the table in the National Assembly for at least 28 days.

In terms of the settlement agreement, the attorney general has decided to ask the Supreme Court to make a decision on the dispute around the interpretation of the section of the Customs and Excise Act setting out the procedure to be followed with the introduction of a new import duty.

Pending the outcome of the Supreme Court's decision, the import tax will still be levied on Jack's Trading CC, but the levies would not be collected from it for now - in effect giving the close corporation a tax break until the case has been decided.

If the case is decided in favour of the minister of finance and the commissioner of customs and excise, Jack's Trading CC will have to pay the tax on its cement imports from yesterday until the Supreme Court has announced its decision, it was agreed.

If the court rules in favour of Jack's Trading CC, the Finance Ministry will have to refund about N$9,7 million, which Jack's Trading has already paid on cement imported by it, to the close corporation, it was also agreed.

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