Victory for lottery licence holders
MBABANE - It’s victory for lottery licence holders as the Supreme Court has found that they are exempt from paying income tax.
The Supreme Court has ordered the Eswatini Revenue Service (ERS) to refund Swaziland Lottery Trust (PTY) Limited over E4.8 million as it was exempt from paying income tax, in terms of Section 20 of the Lotteries Act of 1963, on income derived from public lotteries.
Swaziland Lottery Trust (PTY) Limited operates a lottery business around the country and has lotto shops in Mbabane, Manzini, Siphofaneni, Nhlangano, Simunye, Matata and Siteki.
Dismissed
The company approached the Supreme Court after the High Court dismissed its application to be exempted from paying income tax. The Supreme Court judges who heard the case are acting judges, Mndeni Vilakati, Judith Currie and Andreas Lukhele, who set aside the High Court judgment, where Principal Judge Qinisile Mabuza had found that levies payable to the Gaming Board were not income tax as stipulated in the Income Tax Order.
In the judgment, which has since been set aside by the Supreme Court, Principal Judge Mabuza had also found that the levy which the Lottery Trust paid to the government was no income tax as provided for in the Income Tax Order and the destination was not ERS.
ERS has been ordered to refund Swaziland Lottery Trust a sum of E4 822 433.66, the company paid during the period of March 31, 2014 to February 14, 2017. Swaziland Lottery Trust case against the ERS was that Section 20 of the Lotteries Act exempted it from paying income tax on income received from public lotteries and it was entitled to a refund of income tax already paid.
In its judgment, the Supreme Court highlighted that the dispute between the parties in the High Court concerned the law only. The court (Supreme Court) further pointed out that the principal question of law before it was whether Swaziland Lottery Trust was exempted from paying income tax on income derived from public lotteries. Acting Judge Vilakati, who wrote the judgment, observed that Section 20 of the Lotteries Act of 1963 used the word ‘notwithstanding’. He said this was an indication that there were other statutory provisions concerning the taxation of lotteries which were inconsistent with Section 20.
“In using ‘notwithstanding’the language and the purpose of Section 20 makes it clear that in the event of a conflict between it and any other law, Section 20 prevails,” said Judge Vilakati. He further mentioned that the context of Section 20 was taxation of lottery licence holders and this was evident from the section heading which appeared above the provision. According to the judge, the section heading was a pointer of what it was about.
“The meaning which must be attributed to Section 20, therefore, is that the holder of a lottery licence is exempted from paying income tax on income derived from public lotteries. Does the construction I attribute to Section 20 lead to insensible results? In other words, does it result in lottery licence holders not paying tax?” asked Judge Vilakati.
Determined
It was the court’s finding that lottery licence holders were enjoined to pay government levies, determined by the Ministry of Commerce, Industry and Trade of between 10 to 15 per cent of gross gaming revenue. Judge Vilakati said this was in terms of the Lotteries Control Regulations made under the Lotteries Act. He went on to state that in argument before them (Supreme Court judges) Lawyer Nkosinathi Manzini, who represented ERS, contended that the levy on gross gaming revenue paid by lottery licence holders was not tax.
Judge Vilakati said the implication of the argument was that interpreting Section 20 to mean lottery licence holders were exempt from paying income tax was un-businesslike or gave them a free ride. He further pointed out that the Collins English defined the word ‘levy’ when used as a noun as ‘as sum of money, that you pay, for example as a tax to the government’. The judge went on to highlight that the Oxford Advanced Dictionary defines the verb ‘levy’ as ‘to use official authority to demand and collect payment, tax etc’.
“In Eswatini, lottery licence holders are enjoined by Lotteries Control Regulations, 2016 to pay levies determined by the Ministry of Commerce between 10 to 15 per cent of gross gaming revenue. The levies are a sum of money which lotteries are compelled to pay to the government; it is not a voluntary payment. Second the government uses official authority, the regulations, to demand and collect payment,” said Judge Vilakati. The court said the levies which lotteries paid were a tax.
It was further his finding that lottery licence holders did not get a free ride. He said consequently construing Section 20 to mean lottery licence holders did not have to pay income tax.
“Section 13 of the Act exempts lottery licence holders from paying income tax. Section 12 of the Order deals with exemptions from income tax. Section 12 of the revenue authority contended that Section 13 of the Act of the order impliedly repealed Section 13 of the Act. The court below (High Court) accepted this argument advanced by the revenue authority,” reads part of the judgment.
Exempted
During the argument of the matter, the company argued that it should be exempted from paying income tax as it paid levies to the Gaming Board.
In its application, the appellant ( Swaziland Lottery Trust ) submitted that it had since 1995 paid taxation to the Gaming Board by way of levies as stipulated in the Lotteries Act.
It was further the appellants’ contention that since the start of business in 1995, it was making losses and was subjected to taxation by SRA (now ERS). The applicant submitted that in 2013, it made its first profit and the respondent taxed the company in respect of income derived from its lottery business.
In opposition, ERS averred that levies allegedly paid by the appellant were provided for in the Lotteries Act. ERS also argued that because the levies were not paid to it they did not amount to tax.
The respondent (ERS) further denied that the applicant was subjected to double taxation and averred that there was not prejudice suffered by the applicant.
It was further argued on behalf of ERS that the Income Tax Order of 1975 specified income to be exempted from tax and income generated from lotteries was not specified therein as being exempted.
Applicant
The respondent contended that the declaratory order that was sought by the applicant could not be granted because the Lotteries Act was subservient to the Income Tax Order in as far as it dealt with the taxation of income and since the applicant was not exempted under the Income Tax Order.
In its judgment, the Supreme Court directed ERS to also pay costs of the appeal including costs of two counsel on the scale of analogous to Rule 68 (2) of the rules of the High Court. The court further set aside the order of the High Court with the following; that the appellant was exempt from paying income tax, in terms of Section 20 of the LotteriesAct of 1963, on income derived from public lotteries, the decision of the ERS general commissioner of March 23, 2017 was reviewed and set aside and ERS was directed to refund the appellant the sum of E4 822 433.66 paid by the appellant during the period from March 31, 2014 to February 14, 2017. ERS was also ordered to pay costs of the application.
Swaziland Lottery Trust (PTY) Limited was represented by Advocate Marcus and his junior Emma Webber on instruction of Mlungisi Khumalo of Khumalo Attorneys.