In the Court of Appeal of Tanzania At Dar es Salaam Civil Appeal No. 135 of 2015 Between Hotels Association of Tanzania (HAT). And The Attorney -Respondent (Appeal from the Judgment and Decree of the High Court of Tanzania at Dar es Salaam (Hon. Mziray, Kihiyo and Teemba, JJ) dated 2" October 2015 in Miscellaneous Civil Cause No. 3 of 2915) APPELLANT'S WRITTEN SUBMISSION IN SUPPORT OF THE APPEAL Made under Rule 106 (1) and (2) of the Tanzania Court of Appeal Rules, 2009 May it please You Honourable Justices of Appeal, ‘The humble Appellant wishes to submit on the Appeal as follows} Introduction The Appellant lodged a petition before the High Court of Tanzania Seeking declaratory orders of the High Court on whether imposition of service levy to tourist hotels and tented camps by the Local Government Authorities is correct in law. The Appellant's view is that the continued Imposition of service levy to hotels including tourist hotels end tented camps contravenes Section 13 (2) of the Local Government Finances ‘Act, Cap 280 (LGFA) as amended by section 35 of the Finance Act, Page 10192003; Article 138 (1); Article 26 (1); and Article 24 (2) of the Constitution of the United Republic of Tanzania 1977 as amended from tme to time, 1.0 Brief statement of facts 1.1 The crux of this Appeal relates to exemption of Hotels including tourist hotels and camping tents from paying service levy to local government authorities. The Respondent Claims that Hotel including tourist hotels and cemping tents are not exempted from paying service levy as per section 35 and 36 of the Finance Act, 2012. The Appeliant maintains that in terms of section 13 (2) of the Local Government Finance Act (LGFA) as amended by section 35 of the Finance Act, 2003 Hotels including tourist hotels and tented ‘camps are exempted from paying service levy. Honourable Justices of Appeal 1.2. Section 13 (1) of the LGFA empowers the local government authorities to make by laws and impose such rates to be paid by the inhabitants or such categories of inhabitarts, for or in connection with such services, things, matters or acts as the authority may describe or specify in the by-laws, 1.3. Pursuant to this provision many local government authorities in Tanzania enacted by-laws imposing a levy known as service levy or city service levy. The rate prescribed is 0.3% Of the turnover of an entity net of value added tax and excise duty. 1.4 In the year 2003, section 13 of the LGFA was amended by Section 35 of the Finance Act, 2003. This anendment exempted certain categories of inhabitants within the vicinity of local governments from paying service levy. (A copy of the LGFA and the Finance Act, 2003 are found on pages 12 to 62 and 77 to 143 of the record of appeal) Page 20f291.8 Hotels including tourist hotels and camping tents, which are under guest houses is one of the categories exempted from Paying service levy by the Finance Act, 2003. However, despite the exemption by the Finance Act, 2003 the local government authorities have continued to impose and collect service levy from hotels including tourist hotels and tented camps. (Some of the demand notices issued by Karatu District Couneil, lala Municipal Council were appended to the Petition and are found at pages 74 to 76 in the Record of Appeal Volume | and are also hereby appended at Tab- 2 for your easy reference) 1.6 The continued imposition of service levy to hotels including tourist hotels and tented camps has led to multiple of disputes between the exempted hotels and local government authorities. One of such case is the case of Distrist Executive Director- Bunda District Council Versus Managing Director- Kirawila Camp filed in the Resident Magistrate Court of Musoma. Further, there a several criminal cases filed in various district courts in lala, Babati, Karatu, Arusha and Ngorongoro all claiming service levy from various hotel and tented camps owners in those jurisdiction. 1.7. In the case of District Executive Director-Bunda District Council versus managing Director Kirawila Camp,District Court deciared that by virtue of section 13 (2) of the LGFA as introduced by section 35 of the Finance Act, 2003, the Plaintiff ( Bunda District Council) had no mandate to collect service levy from the Defendant (Kirawila camp). (A copy of the decision of the Resident Magistrate Court of Musoma attesting to this fact is found on pages 63 to 67 of the record of appeal (VOL |) 1.8 Following the long tag-of-war between the local government authorities and hotel owners, the Appellant (out of goodwill ‘and in undertaking its duty as the representative of all hotels Page 30f29and tourism facilities in Tanzania) sought the intervention of the Prime Minister on the matter. The Prime Minister is the overseer of the Ministry of Local Governments which Supervises all the local government authorities in Tanzania. (A copy of the letter written by the Appellant to the Prime Minister's office was appended to the petition and is found at page 69 of the Record of Appeal Volume |) 1.9 On 27" October 2014, the Prime Minister's office replied to the Appellant's letter contending that section 35 of the Finance Act, 2003 which grants exemption to Hotels from paying service levy has been impliedly repealed by section 35 and 36 of the Finance Act, 2012. The Prime Minister's office concluded that hotels are no longer exempted from Paying service levy following the 2012 amendments. (A copy of the Prime Minister's office letter was appended to the Petition and is found at page 71 of the Record of Appeal.) 1.10 Following the Prime Minister's office view, the local government authorities have continued to impose service levy on tourist hotels and tented camps despite the clear Provisions of the law. 1.11 The Appellant does not subscribe to the Prime Minister's office view that section 13 (2) of the LGFA wes impliedly repealed by section 35 and 36 of the Finance Act 2012 to take away the exemption granted to tourism hotels and tented camps. The Appeliant is of the firm view that section 35 and 36 of the Finance Act, 2012 relied by the Prime Minister's office were aimed at amending section 6 and 7 of the LGFA with a view to expanding the tax base for local government authorities and were not meant to amend or repeal section 13(2) of the LGFA. (A copy of the Finance Act, 2012 and Finance Bill 2012 are on page 121 to 143 ( VOL |) ‘and 562 to 570 of the record of appeal (vol I) Page of 191.12 The Appellant, knowing that section 13 (2) of the LGFA is still operational and at the same time the local government authorities have continued to impose service levy on tourist hotels and tented camp, lodged a petition in the High Court challenging such imposition. 1.13 The trial Court decided in favour of the Respondent on the following reasons; 1.13.1 Tourist hotels and tented camps are not ‘exempted from paying service levy because the word inhabitants used in section 13 (2) of the LGFA referred to individuals residing in a local jurisdiction and not an establishment in the form of corporate entity such as tourist hotels; 1.13.2 Section 35 and 36 of the Finance Act, 2012 Fequire the corporate entities and their branches to Pay service levy to local government authorit 1.13.3 The question of implied repeal does not arise in the case 1.13.4 — The provisions relied by the local government authorities to impose service levy to hotels and tented camps are contained in the Acts passed by the Parliament and dully signed by the President as required by the law. 1.14 The Appellant was aggrieved with the decision of learned Judges and has preferred this Appeal for redress, 2.0 Issues for determination Honourable Justices of Appeal Pages.of193.0 The Appellant considers the following to be issues for determination by this Court; 2.1 Whether the leamed trial judges were correct in law in holding that section 13 (2) of the LGFA aimed at exempting individuals and not tourist hotels and tented camps; 2.2 Whether the leamed trial judges were correct in law in holding that section 37 of the Finance Act, 2003 do not totally ‘exempt tourist hotels and tented camps; 2.3 Whether the leamed trial judges were correct in law inholding that section 35 and 36 of the Finance Act, 2012 require tourist hotels and tented camps to pay service levy; 2.4 Whether the learned trial judges were correct in law in holding that the continued imposition of service levy to tourist hotels and tented camps do not contravene Article 24(1); 26 (1); and 138 (1) of the Constitution of the United Republic of Tanzania, 1977 having held that section 13 (2) of the LGFA is stil operational A concise statement on the issues for determination Honourable Justices of Appeal The Appellant wishes to address the first and second issues together and the rest in seriatim; 3.1. Regarding the first and second issue that, wether the Jearned trial judges were correct in law in holding that section 13 (2) of the LGFA aimed at exempting individuals and not tourist hotels and tented camps; and whether the learned trial judges were correct in law ‘holding that section 37 of the Finance Act, 2003 do not totally exempt tourist hotels and tented camps, the Appellant wishes to submit as follows; Page 6of393.1.1 In their judgement at page 11 (found on page 659 of the record of appeal,. the learned trial judges were of the view that Section 13(2) of the LGFA as introduced. by section 35 of the Finance Act, 2003 exempted "inhabitants" or "categories of inhabitarts” and not “corporate entities”, 3.1.2 To amplify their view, the learned trial judges quoted the Black's Law Dictionary &th Edition which defines inhabit to mean: - fo dwell in: to occupy permanently or habitually as residence. The same Law Dictionary also defines Corporate Entity to mean an organization existing independently of its shareholders. As a separate entity, a corporation can, in its own name, ‘sue or be sued, lend and borrow money, and buy, sell, ease and morigage a property (see page 658 of the record of appeal). 34.3 The learned trial judges went further to look at the interpretation of the word Hotel under section 2 of the then repealed Hotels Act, 1963 Cap 105 RE 2002 Which defined ‘hotel’ to mean ‘any establishment intended for the reception of travellers or visitors who ‘may choose to stay there and carried on with a view to profit or gain’ 3.1.4 Having looked into the above interpretations the learned trial judges came to the conclusion that the term inhabitant refers to a natural person whereas corporate entity refers to an artificial person established under the law for a certai purpose distinct from its shareholders, The trial judges further stated that tourist hotels and tented camps being establishment having legal personality distinct from its ‘owner are not natural persons to acquire the status of an inhabitant, they are corporate entities. They therefore concluded that the term inhabitarts used in Page 7 of19section 13 (2) of the LGFA referred to individuals residing in a local jurisdiction offering services within that jurisdiction and not an establishment in the form Of corporate entity (see page 11of the judgement found in page 659.of the record of appeal. 3.1.5 With all due respect to the learned trial judges we are of the firm view that the trial judges erred in law by holding that the inhabitants exempted from paying service levy under section 13 (2) of the LSFA means. natural persons and not tourist hotels and tented ‘camps for the following reasons; First, it is not true that the term ‘inhabitants’ used on section 13(2) of the LGFA means ‘individual. The word inhabitant as defined in Oxford Advanced Leamer's Dictionary New 8” Edition at page 771 means a Person or animal that lives in a particular place. The Word person is defined under section 4 of the Interpretation of Laws Act, Cap 1 to mean any word or ‘expression descriptive of a person and includes a Public body, company, or association or body of persons, corporate or unincorporated. So clearly you can see that the word inhabitant refers to either natural or legal person living or occupying a particular place. Hotels including tourist hotels and tented camps being legal persons therefore qualify as inhabitants by virtue of section 13(2) of the LGFA which provides: " (2) Notwithstanding the powers to impose rates, charges, levies, fees or dues conferred upon local goverment authorities under section 6, 7, 8 and 9 of the Local Goverment Finances Act, 1982, the local goverment authorities Page 8of29‘shall not impose rates to be paid by the inhabitants or such categories of inhabitants, for, on or in connection with such services, ‘matters or acts specified in tho Third Column of the Schedule" Secondly, the the leamed trial judges in their judgment agreed with the Appellant that section 13 (2) of the LGFA bars local government authorities from imposing service levy on inhabitants or categories of inhabitants (see paragraph 1 of page 13 of the judgement, which is found on sage 661 of the record of appeal). However the leamed trial judges did Not share the same view with the Appellant that tourist hotels {and tented camps fall within the ambit of section 13 (2) of the LGFA as a category of inhabitants, 3.1.6 It is our respective submission that, if you look at the wording of section 13 (2) of the LGFA you will note that section 13 (2) of the LGFA is to be read together with the Schedule to the Act. Again if you go through, the Schedule specifically third Column of item 4, Paragraph (d) of the Schedule, you will see clearly that Hotels including tourist hotels and tented camps are exempted from paying rates, charges, fee, and levies. Itis our humble submission that there was no need for the leamed trial judges to go further to interpret the words inhabitant, corporate and Hotel in order to determine whether Hotels tourist hotels and tented camps are exempted from paying service levy. It would suffice for them to look at the provisions of the law, which in unequivocal terms grants exemption to Hotels including tourist hotels and tented camps from paying service levy. Page 90293.1.7 Even if we assume there was such neec, which we think there was not, we still submit that Hotels including tourist hotels and tented camps fall within the ambit of the word inhabitant as used under section, 18 (2) of the LGFA. As rightly put by the learned trial judges, the word inhabit means to dwell in; or to ‘occupy permanently or habitually as residence. In light of the meanings of these worcs, it is our respective view that section 13 (2) of the LGFA is not intended to cover natural persons only but rather both natural and legal persons. The leamed judges therefore erred when they ended up defining the term inhabitant to only mean an individual and forget the wider meaning provided under section 4 of the Interpretation of laws act. 3.1.8 Having noted that the conclusion they reached is not supported by law, the learned judges decded to hold that that item 4 paragraphs (a) and (d) of the Schedule to the LGFA as introduced by section 37 of the Finance ACT, 2003 do not provide total exemption of payment of service levy but rather limits the imposition of service levy of not exceeding 0.3% of tum over charged from corporate entities and not to ‘non-corporate entities, 3.1.9 We agree that the imposition of service levy is limited to the rate not exceeding 0.3% of the tum over charged from corporate entities. However we do not agree with the learned trial judge that this limitation extends to tourist hostels and tented camps specified under paragraph (d) of item 4 of the Schedule. The third column of the item 4, paragraph (d) of the ‘schedule clearly provides that the local government authorities shall not impose rates, charges, levies, Page 100f 19fees or duties on tourist hotels and tented camps. This means that Hotels including tourist hotels are totally ‘exempted from paying service levy. 3.1.10 In those premises we invite this Honourable Court to answer the first and the seccnd issue in negative, Honourable Justices of Appeal 3.2 With regard to the third issue, whether the learned trial Judges were correct in law in holding that section 35 and 36 of the Finance Act, 2012 require tourist hotels and tented camps to pay service levy, the Appellant wishes to submit as follow; 3.2.1 In their judgement, the leamed judges were of the view that the wording of sections 6 and 7 of the LGFA, introduced by section 35 and 36 of the Finance Act, 2012 respectively require corporate entities and their branches to pay service levy to local government authorities in which they are located. The learned trial judges concluded therefore that the hotels including tourist hotels and tented camps are not exempted from paying service levy (see paragraphs 1 and 2 of age 662 of the record of appeal) 3.2.2 With all due respect to the learned judges we are of the strong view that this view is misconceived f 3.2.3 Before embarking to address this issue, we wish to reproduce the provision of section 35 of the Finance Act, 2012 which brought amendments to section 6 of the LGFA, It is also worth noting that the amendments in section 6 and 7 of the LGFA are similar. Section 35 of the Finance Act, 2012 provides as follows; Page 11 0f19"Section 6 of the Principal Act is amended in subsection (1) by deleting paragraph (y) and substituting for it in the following "(u) All monies derived from the service levy payable by corporate entities or any person conducting business licence at the rate not exceeding 0.3% of the tumover net of the value added tax and excise duty: Provided that, the branches of the corporate entities shall pay service levy to the urban authorities in whose areas of jurisdiction they are located.” 3.2.4 Honourable Justices of Appeal, We pointed out that section 6 (1) of the LGFA provides only for sources of revenue to the urban authorities and district council authorities. Section 6 (1) of the LGFA do not give the local government authorities the mandate to impose service levy. That power is provided under section 13(1) of the LGFA. In our view sections 6,7 and 8 of the LGFA only provide for sources of revenue for the local governments, 3.2.5 Looking at section 6 (1) as amended by section 35 of the Finance Act, 2012, you will note that one of the sources of the local government authorities’ revenue are all the monies derived from service levy payable by the corporate entities. Section 6 (1) of the LGFA further provides to the effect that braches of corporate entities shall pay service levy to the local government authorities. Page 12 of193.2.6 Therefore what the amendments brought by the Finance Act, 2012 did was to separat2 corporate offices from their branch and subject corporate branches to the jurisdiction of the local governments. in which they are located for tax purposes. For instance, if Serena Hotel had another hotel in Karatu, it is only Serena Hotel (head office) which would be responsible for paying service levy prior to the 2012 amendments. However, with the 2012 amendments, the Serena Hotel located in karatu will now be subjected to service levy in Karatu separately from its head office in Dar es Salaam 3.2.7 So the judges are right in saying that the 2012 ‘amendments separated branches from their corporate head office as far as payment of service levy is concerned, However, they were misconceived when they failed to see that Hotels including Tourist Hotels and tented camps are exempted from paying service levy by virtue of section 13(2) of the LGFA. In this regard the amendments brought by the Finance Act 2012 had nothing to do with the exemption provided Under section 13(2) of the LGFA. In other words, the amendments were intended to broaden the tax base in respect of other corporate entities, however, they did not take away the exemption to pay service levy given to Hotels including tourist hotels and tented camps. We must also say that the tourist hotels and tented ‘camps are not the only corporate entities. And in broadening the tax base for local government authorities, the amendment introduced by section 35 of the Finance Act, 2012 targeted these other corporate entities and not the ones already exempted by the law including tourist hotels and tented camps. 130/19That is the essence of the phrase notwithstanding the provisions of section 6, 7, 8 and 9 of the LGFA as used in section 13 (2) of the LGFA, 3.28 Your Justice, in the premises we invite this Honourable Court to answer the thitd issue in negative. Honourable Justices of Appeal 3.3 Coming to the fourth issue whether the learned trial judges were correct in law in holding that the continued imposition of service levy to tourist hotels and tented camps do not contravenes Article 24(1); 26 (1); or 138 (1) of the Constitution of the United Republic of Tanzani 1977 after holding that section 13 (2) of the LGFA is still operational the Appellant wishes to submit as folows; 3.3.1 When determining the issue as to whethe: section 13, (2) of the LGFA was impliedly repealed by sections 35 and 36 of the Finance Act, 2012, the learned trial judges agreed with the petitioner (now the Appellant) (at paragraph 3 of page 662 of the Record of Appeal Volume Il) that if section 35 and 36 of the Finance Act_2012 were intended to repeal_or_amen section 13 (2) of the LGFA, the legislature would have expressly stated so. The learned judges held further that in absence of any particular provision fo repeal section 13 (2) of the LGFA, then the same remains in force as part of the Act, 3.3.2 The leamed judges further agreed with the reasoning and ratio decidendi established by Lord Justice Laws in the case of Thorbum vs Sunderland City Council ( see pages 492 0534 of the record of appeal VOL II specifically pages 63 to 65 of the judgement) that a constitutional statute can only be repealed by express words in a latter statute or by words so specific that Page 140f19the inference of an actual determination to effect the result contended was irresistible (see paragraph 4 of Page 662 of the record of appeal Vol II and paragraph 1 and 2 of page 663 of the same record of appeal).in our view the LGFA is a constitutional statute because. it regulates taking peoples properties (money) in the form of tax which according to Article 138 (1) of the Constitutional of Tanzania cannot be take without an express provision of law. Therefore, having ‘appreciated as such they even went ahead to correctly hold that the question of implied repeal of section 13(2) of the LGFA by section 35 and 36 of the Finance Act, No 8 f 2012 does not arise ( see Paragraph 2 of page 663 of the record of appeal Vol 1, 3.3.3 Despite the clear appreciation of how laws are repealed, they interestingly went ahead to hold that the authorities cited although they are stil good law, do not fit in the present matter and hence inapplicable. You can clearly see how the learned judges contradicted themselves in their conclusior, 3.3.4 Further to that the learned trial judges went ahead to hold that the provisions to wit section 35 and 36 of the Finance Act, 2012 relied by the local government authorities to impose service levy are contained in the Acts of the Parliament. Therefore, the learned trial judge were of the view that the imposition of service levy to corporate entities is according to the law and cannot be interpreted to contravene the Constitutional rights in Articles 24 (1); 26 (1) or 138 (1). 3.3.5 Your Justice, we are of the firm view that the learned judges having held that section 13 (2) of the LGFA is sill in force, it was wrong, at law, for them to continue further to hold that the imposition of servce levy by Page 15 of 9the local government authorities to tourist hotels and tented camps was according to law while section 13, (2) of the LGFA clearly exempts tourist hotels and tented camps from paying service levy. As rightly determined by the learned trial judges that section 13 (2) is stil in force, the leaned trial judges ‘ought to have held that exemption from paying service levy to Hotels including tourist hotels and tented ‘camps is still operational 3.3.6 Your Justice, Article 138 (1) of the Constitution of the United Republic of Tanzania, 1977 in mandatory terms prohibits imposition of tax of any kind save in accordance with the law or procedure lawfully prescribed and having the force of law. Section 13 (2) of the LGFA in unequivocal terms ‘exempts Hotels including tourist hotels and tented ‘camps from paying service levy to local government authorities. It follows therefore the continued imposition of service levy to Hotels including tourist hotels and tented ‘camps by the local government is without the authority of the law and it clearty violates Article 138 (1) of the United Republic of Tanzania, 1977 3.3.7 Your Justice, Article 24 (1) of the Constitution of the United Republic of Tanzania, 1977 provides that every ‘person is entitled to own property, and has a right to the protection of his property held in accordance with the law. ‘Sub article (2) of article 24 provides that "Subject fo the provisions of sub article (1), it shall be unlawful for any person to be deprived of his property for the Page 16of19purposes of nationalization or any other purposes without the authority of law which makes provision for fair and adequate compensation’. We are of the firm view that the continued imposition, of service levy to Hotels including tourist hotels and tented camps by the local government authorities without the authority of the law and as we have alluded earlier deprives the hotels owners of the money paid for service levy. In our opinion this contravenes the provisions of article 24 (1) and (2) of the Constitution of the United Republic of Tanzania, 1977 3.3.8 Your Justice, Article 26 (1) of the Constitution of the United Republic of Tanzania, 1977 provides "that ‘every person has the duty to observe and to abide by this Constitution and the laws of the United Republic”. This article requires every person including local government authorities to abide by the Constitution, and the laws of Tanzania. The Constitution guarantees right to own property; freecom against unlawfully deprivation of one's property; and freedom against arbitrary taxation. ‘The LGFA on the other hand unequivocally exempts Hotels including tourist hotels and tented camps. It follows therefore that the continued imposition of service levy to Hotels including tourist hotels and tented camps clearly violates section 13 (2) of the LGFA; Article 138 (1); and article 24 (1) and (2) of the Constitution which is a clear violation of Article 26 (1) of the Constitution of the United Republic of Tanzania, 1977 Page 17 0f193.3.9 In those premises the holding by the learned judges in paragraph 2 of page 664 of the record of appeal Vol I that the imposition of service levy to corporate entities is according to law and cannot be interpreted to contravene the constitutional rights in Articles 24(1); 26(1) and 138(1) is clearly wrong. We therefore invite this Honourable Court to answer the fourth issue in negative, Honourable Justices of Appeal In the final analysis, we humbly pray that this Honourable Court be pleased to allow this appeal, quash the decision of the High Court and hold that section 13(2) of the LGFA is still in force and Hotels including tourist hotels and tented camps are exempted from paying service levy by virtue of section 13(2) of the LGFA. We also pray that the petitioner be granted costs for the appeal We humbly submit. ae ph Dated at Dar es Salaam tis../‘6 day of December 2015 Advocate for the Appellant Lodged in the registry at Dares Salaam this.!7.day of December 2015 Page 18 0f19Drawn and Filed by: ‘Ako Law in Association Co 11" Floor, Golden Jubiles Ohio Street PO Box 80512 | Dares Salaam Copy to be served Upon: The Attorney General Kivuko Front PO Box 9050 IW90 FS Dares Salaam 18 ie 2015 Page 19 0f19