NetOne Cellular (Pvt) Ltd v Zimbabwe Revenue Authority

NetOne Cellular is a licensed telecommunications company operating in terms of the Postal and Telecommunications Act. The Zimbabwe Revenue Authority (respondent) conducted an audit of the applicant's tax affairs for the period 2009-2016 and issued assessments for special excise duty in terms of section 172F of the Customs and Excise Act. The respondent included in its computation of special excise duty: interconnection fees (charged between phone network providers when calls terminate on another network), roaming fees (charged to/by offshore telecommunications providers), access fees (periodic sums paid by customers to keep contract SIM cards), and ZETDC commission (earned by the applicant for providing a facility to customers to purchase ZETDC electricity coupons). The applicant objected to the inclusion of these fees on the grounds that interconnection and roaming fees result in double taxation, and that access fees and ZETDC commission are not licensed services under the Postal and Telecommunications Act. The respondent disallowed the objections on 30 September 2017, leading to this application for declaratory relief.

• Whether interconnection fees, roaming fees, access fees and ZETDC commission constitute 'airtime' as defined in section 172E of the Customs and Excise Act
• Whether such fees are subject to special excise duty in terms of section 172F of the Customs and Excise Act
• What is the proper interpretation of 'sale value of airtime' for purposes of special excise duty
• Whether the phrase 'such other service' in the definition of 'airtime' is wide enough to encompass the disputed fees

The application was dismissed. No order as to costs.

The binding legal principles established are: (1) The phrase 'sale value of airtime' in section 172F of the Customs and Excise Act must be interpreted according to the ordinary meaning of 'sale value' as 'the amount of money that something would make if it were sold', not by reference to definitions in repealed legislation. (2) The definition of 'airtime' in section 172E includes not only the specifically enumerated services (voice calls, SMS, MMS, internet bandwidth) but also 'such other service as a licensed operator may offer through a cellular telecommunication system or any other electronic communications service'. (3) Interconnection and roaming fees received by a telecommunications operator when calls from other networks terminate on its network constitute income that is 'sale value of airtime' subject to special excise duty. (4) Access fees paid by customers for continued access to a telecommunications network constitute 'other services' within the definition of airtime and are subject to special excise duty. (5) Commission received for services provided through a cellular network (such as the sale of electricity coupons via SMS) constitutes 'such other service' within the definition of airtime and is subject to special excise duty.

The court made non-binding observations regarding the general principle that costs should not be awarded in tax cases unless an application or the defense of it is frivolous. The court also noted that while the applicant correctly identified that interconnection fees paid by it to other operators constitute a cost (not subject to special excise duty), the applicant failed to address the corresponding interconnection fees received from other operators, which constitute income. The court observed that meanings given to phrases in one statute are not necessarily to be given to them when used in another statute, citing B.M. and Others v Commissioner of Taxes 1970 RLR 13 at p18.

This case provides important guidance on the interpretation of special excise duty provisions in Zimbabwe's Customs and Excise Act, particularly in the telecommunications sector. It establishes a broad interpretation of 'airtime' that extends beyond traditional voice calls, SMS, MMS and internet bandwidth to encompass 'such other services' offered by licensed telecommunications operators through their cellular systems. The judgment clarifies that interconnection and roaming fees received by a telecommunications provider constitute taxable income under the special excise duty regime, and that ancillary services (such as access fees and third-party commission services) provided through the cellular network also fall within the tax base. The case demonstrates the principle that statutory terms should be given their ordinary meaning unless specifically defined in the legislation, and that definitions from repealed legislation should not automatically be imported into new statutes. It also confirms the general principle in tax litigation that costs are not usually awarded unless proceedings are frivolous.