Well, most of you may know that there is a common law principle which prohibits anyone from charging interest which is more than the principal debt. That principle has been established by the courts of law over several centuries and it is so solid and profound that barely no-one can bend it. This is what my learned colleagues, the lawyers, call the in duplum rule and we will analyse why the taxman charges more interest than tax. In this article, words importing the masculine shall be deemed to include the feminine.
The in duplum rule
Like we stated above, the in duplum rule does not permit the charging of interest which is more than the principal debt. A closer look at that principle will reveal a few important issues that will help us unravel the case at hand. First, it must be noted that the rule is applicable in contractual agreements only. What this means is that the rule applies in arrangements such as loan arrangements where both the lender and borrower sign on the dotted line, committing to abide by the terms of the agreement.
Secondly, it is important to point out that the in duplum rule is a common law principle, which means that it was brought into existence through decisions of courts of law. What happens in such instances is that one court will make a ruling and that ruling is later referred to by other courts of law when they rule in similar or related court cases. In other words, common law is not found in the legal statutes or laws of particular countries, but it is based on what is known as precedent decisions. Now, having analysed the above, let us take a peep into our tax laws and find out how things are handled.
The local laws
The local tax laws prescribe that BURS shall charge interest on the tax until the principal tax is fully paid. In simple words, the tax laws overpower the in duplum rule. For example, the VAT Act states that, ‘a person who fails to pay any tax or penalty by the due date for payment under section 33, is liable to pay interest on the unpaid amount at the rate specified in paragraph 2 of the Fifth Schedule, calculated from the date on which the payment was due until the date on which payment was made.’ A closer look at that extract of the law points to the fact that interest is charged, ‘from the date on which the payment was due until the date on which payment was made.’ Well, technically, that simply means that there is no limit as to the amount that BURS can charge as interest; now that’s huge buddy. This is the reason why BURS can charge interest which is more than the principal tax.
We stated that the in duplum rule is a law applicable under contractual agreements. However, tax is not contractual, i.e., no one signs a contract with BURS that they will pay tax. BURS collects tax based on the fact that it is mandated to do so by law; therefore, tax is not contractual but statutory. Secondly, we must state that a common law principle is overpowered the moment there is a specific law that goes against it. This is because, in reality, statutory laws take supremacy over common law principles.
Tax hint & cheers
If you have never had a tax audit conducted on your business by a tax firm, we highly recommend that you consider such so as to proactively reduce tax gaps. As we say goodbye, remember to pay Caesar what belongs to him. If you want to consult, join our free Tax WhatsApp group or to know about our 9 Tax e-books, send a text to +267 7181 5836 or email us at jhore@aupracontax.co.bw. You can read more tax articles on our website, www.aupracontax.co.bw, under the ‘Tax articles’ tab.
