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CRAN wins Supreme court ruling against Telecom

by Kelvin Chiringa

The Communications Regulatory Authority of Namibia has scored a Supreme Court victory against Telecom after it came out that a 1.5% levy imposed by the regulator was after all not an unconstitutional tax.

CRAN ,by regulation published on 13 September 2012 ,imposed a levy of 1.5% on gross income of telecommunications providers, including Telecom.

Telecom refused to honour the levy and challenged section 23(2)(a) and the regulation made under it in the High Court, alleging that the regulation impermissibly had retroactive effect, and the section either constituted an unconstitutional tax without representation, or constituted an unconstitutional delegation by parliament of plenary legislative power. 

The service provider had initially won the case in the High Court while costs were ordered against CRAN. 

On appeal, the Supreme Court found that High Court had misdirected itself on the applicable test for determining if a charge is a tax or a regulatory levy and that even if a charge has all the attributes of a tax but is connected to a regulatory scheme, it will not be a tax.

“The Act represents a complex and complete regulatory framework for the affected industries with substantial benefits and privileges to those granted licenses to operate under it; and, therefore, there is a relationship between the scheme and those being regulated.”

“The pith and substance of the Act (or its dominant purpose) is to regulate behaviour and the raising of revenue is only incidental. The levies imposed are intended for the carrying out of the policies of the legislation and need not be directly linked to the costs of regulation,” ruled the Supreme Court. 

The court further upheld that although a levy of 1.5% on annual turnover was not per se unconstitutional, as it was within the international norm as shown in evidence and in cases considered, the absence of clear (or any) guideline or limit for its exercise failed to remove the risk of an unconstitutional exercise of discretionary power by CRAN, and rendered the section and regulation made thereunder unconstitutional. 

For the period preceding the taking effect of order of invalidity, CRAN can only exact payment from Telecom such amounts as are due after the regulation came into force.

Since the litigation enriched Namibia’s constitutional jurisprudence and none of the parties was frivolous; Supreme Court ruled that it was an appropriate case for each party to bear its own costs; both in the High Court and on appeal.