High Court Judge Justice Happius Zhou has scrapped the two percent transaction tax which sparked an uproar from Zimbabweans after it was introduced by Finance Minister Mthuli Ncube last year.
The ruling follows a successful challenge by a pro-democracy activist Mfundo Mlilo who was represented by Tendai Biti a former Finance Minister.
Ncube introduced the new tax as part of the government's Transitional Stabilisation Programme, which resulted in the skyrocketing of prices of both goods and services, as the market tried to conform to the new measures.
The Finance (Rate and Incidence of Intermediated Money Transfer Tax) Regulations was published in SI205/2018.
Under the so-called Intermediated Money Transfer Tax, the government effectively taxes every money transfer in Zimbabwe, for both ordinary people and companies, 2% tax.
Breaking News: High Court Judge Justice Zhou has set aside SI 205/2018 on the 2% transaction tax. The case was argued by @BitiTendai. More details on implications of judgement to follow.
The tax was introduced on 1 October 2018 by the Ncube in a bid to increase government's revenue. The government has since been able to collect several billions through the tax.
Biti welcomed the ruling but immediately added the war is not over.
"We will study the judgement to see if we can go after the Act as well.
"The Finance Act is independent of the SI…but the SI has not been repealed. Now that it has been set aside by the court they will move to the Finance Act. The Act will be their defence to say this was included in the Finance Act," said Biti in an interview with NewZimbabwe.com soon after the judgement was delivered.
In his application, Mlilo said Ncube's decision was made without the necessary backing of the law, in particular the amendment of the Income Tax Act or the regulation of the tax in a Statutory Instrument.
Mlilo further said Ncube's imposition of the tax was illegal and unconstitutional.
He also accused Ncube of usurping the powers of Parliament by pretending to amend a law and promulgating a fresh law, which is too wide and in contravention of the Constitution.
The activist also said Ncube had on October 12, 2018 belatedly enacted the Finance (Rate and Incidence of Intermediated Monetary Transfer Tax) Regulations Statutory Instrument (SI205/2018), in which he sought to legalise and actualise his announcement done on October 1, 2018.
He successfully argued that the SI still remained unconstitutional and a nullity at law.
Mlilo also said in terms of the country's laws, a Minister cannot amend an Act of Parliament.
The activist called for the immediate suspension of the decision taken by Ncube.
The intermediate money transfer tax was initially pegged at five cents per transaction.
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