Bill Watch 53/2019 [Update on
Statutory Instruments: Part 2] 16 October 2019
BILL WATCH 53/2019
[20th October 2019]
Update on Statutory Instruments: Part 2
This bulletin continues where Bill Watch 52 of 16th October [“Statutory
Instruments: Part 1]” [link] stopped; it will deal with Government Gazettes from
SI 205/2019 of 20th September up to SI 221/2019 of 18th October.
But first we draw attention to Constitution Watch 8/2019 of 19th October [link]
commenting on the implications of the High Court decision in the important case
of Mlilo v Minister of Finance and Economic Development [link]. The judgment
invalidated SI 2015 gazetted on 12th October 2018 – the statutory instrument
that imposed the 2% transaction tax. The government then made it lawful in the
Finance No 2 Act gazetted on the 21st August 2019 and backdated it to the
time the 2% tax was introduced.
This bulletin indicates three recent statutory instruments which amend Acts of
Parliament –their validity could be challenged in the High Court using the Mlilo
decision as a precedent.
Gazette of 20th September 2019
Correction of maximum income tax rate to 40%
SI 205/2019 [link] which amends the Finance Act is the first of the statutory
instrument that are open to challenge on the basis of Mlilo's case. The SI
amends the income tax bands for the period 1st August to 31st December
2019, correcting the rate for the top taxable bracket to 40% from 45% specified
in the Finance (No. 2) Act. It has been plausibly suggested that the 45% may
have been a typographical error in the Finance (No 2) Act, because the Budget
Presentation itself specified 40%.
The change went undetected and
uncorrected while the Bill was going through Parliament and a few days later
appeared in the Finance (No. 2) Act.
Note: The Minister can easily resolve doubts about the SI's validity by including
in the next Finance Bill a clause confirming 40% as the highest income tax rate
for the five-month period August-December 2019. He will have the opportunity
to do so when he presents the 2020 National Budget during November.
Insurance: Increased minimum prescribed assets ratios for insurers
SI 206/2019 [link] is aimed at registered insurers. It effectively doubles the
minimum prescribed asset ratios, i.e., the proportions of an insurer's total
assets that must be held in "prescribed securities" such as stocks or bonds
issued by the State, statutory bodies and local authorities [including, for non-life
insurers, Treasury bills and similar short-term instruments] or other investments
approved by the Minister of Finance and Economic Development. The SI
replaces SI 24/2016, the previous SI on the subject and goes into far greater
detail than its predecessor on the penalties that can be imposed by the
Insurance and Pensions Commission [IPEC] for non-compliance.
Note: A "prescribed assets" mechanism for insurers is usually justified as
protecting policy holders against the consequences of injudicious investments