Telecom to cough up 1.5% turnover to Cran

The Supreme Court has found that although a levy of 1.5%, imposed by the Communication Regulatory Authority of Namibia (Cran) on the annual turnover of telecommunications service providers like Telecom Namibia, was not unconstitutional, as such, the absence of a clear guideline or limit has however created the risk of an unconstitutional exercise of discretionary power by the regulator.

The country's highest court thus found that section 23(2) (a) of the Communications Act and the regulation made thereunder was unconstitutional.

However, the order of invalidity is only operational after the date of the judgement.

“For the period preceding the taking effect of order of invalidity, Cran can only exact payment from Telecom for such amounts as are due after the regulation came into force,” the Supreme Court ruled.

A full bench, consisting of Deputy Chief Justice Petrus Damaseb and justices Dave Smuts and Fred Choma, ruled the levy of 1.5% was within the international norm, as shown in evidence and in the case law considered.

Cran imposed the 1.5% levy on the gross income of telecommunication providers, including Telecom Namibia, on 13 September 2012.

However, Telecom refused to honour the levy and challenged section 23(2) (a) of the Act and the regulation made under it in the High Court.

The parastatal alleged the regulation impermissibly had a retroactive effect and the provision either constituted an unconstitutional tax without representation or an unconstitutional delegation by parliament of plenary legislative power.

The High Court in October 2016 upheld the constitutional challenge, holding that section 23(2) (a) of Communications Act was beyond what section 23(1) authorised.

“There was no connection between the regulatory scheme and the charges levied, based as it was on a percentage and without actual or properly estimated costs of regulation,” the High Court ruled.

The court added that the order of invalidity took effect from the moment the Act came into force, as no order was made delaying the order of invalidity. A costs order was awarded against Cran.

The Supreme Court ruled on Monday after an appeal by Cran that the High Court misdirected itself on the applicable test for determining if a charge is tax or a regulatory levy.

“Even if a charge has all the attributes of a tax but it is connected to a regulatory scheme, it will not be a tax,” the full bench of Supreme Court ruled.

The Supreme Court held that the Communications Act represents a complex and complete regulatory framework for the affected industries, with substantial benefits and privileges to those granted licences to operate under it.

“Therefore there is a relationship between the scheme and those being regulated,” the court said.

The provisions of the Communications Act authorises Cran, by regulation, to impose a levy to 'defray' its 'expenses' for the purposes of regulating the telecommunications, postal and radio spectrum industries.

However, the Supreme Court found that although a levy of 1.5% on annual turnover was not, as such, unconstitutional, the absence of a clear guideline or limit to exercise its power failed to remove the risk of an unconstitutional exercise of its discretionary power.

FRED GOEIEMAN