Absolute confidentiality of tax records lifted, somewhat

South Africans will probably know within the next two months whether the South African Revenue Service (Sars) will grant access, or not, to Jacob Zuma’s tax records from the time that he was president.

This follows a majority judgment of the Constitutional Court confirming a decision by the Pretoria High Court that certain sections of the Promotion of Access to Information Act (PAIA) and the Tax Administration Act (TAA) are constitutionally invalid.

This means the absolute confidentiality placed on taxpayer information has been lifted, but only somewhat. Sars commissioner Edward Kieswetter says the revenue service respects the court’s findings and is applying its mind to the “exact implication for Sars and taxpayers”.

He adds that the judgment does not set aside the tax confidentiality provisions. “It sets a high threshold to meet when access is requested to the tax records of a taxpayer.”

The case stemmed from an application to the high court by Arena Holdings, AmaBhungane and financial journalist Warren Thomson when Sars denied Thompson’s request for access in 2019.

Balancing of rights

The high court found the sections in the act making it impossible to ever disclose tax records constitutionally invalid, and the Constitutional Court confirmed its decision.

In the majority decision, Judge Jody Kollapen wrote that the rights to privacy, access to information and freedom of expression all came together in the matter.

“This case is, in particular, about how the balance is managed between the right to privacy in respect of taxpayer records against the communal interest and the claimed right to access those records when they provide evidence of serious criminality or a risk to public health or safety.”

Although the court granted Parliament 24 months to remedy the unconstitutional sections of the acts, there are specific “read-in” provisions that Sars must now consider in terms of the request for access.

This includes whether the disclosure of the record would reveal evidence of a substantial contravention of, or failure to comply with the law; show evidence of an imminent and severe public safety of environmental risk; and whether the public interest in making the disclosure outweighs the harm.

PAIA creates a framework for the mandatory protection of records that generally contain information “deserving of protection”. However, the same act also provides for a “public-interest override” to moderate this framework.

Kollapen says the effect of the public-interest override is “to continue to maintain a high level of confidentiality while providing a carefully crafted, limited, restrained and relatively onerous basis for the lifting of confidentiality in the public interest”.

Protection at all cost

However, Section 35(1) of PAIA protects all taxpayer information irrespective of whether it warrants protection. “It is protected simply because it is taxpayer information,” writes Kollapen. It is totally immunised from the public-interest override that applies to all other categories of information that enjoy protection.

He continues by saying that “one must be careful not to elevate taxpayer confidentiality to some sacrosanct place where no exception to enable public access to it is possible”.

Kollapen made short shrift of the argument that absolute confidentiality is required to achieve taxpayer compliance. “On the contrary, while most taxpayers might assume that, in general, their tax information will be protected, it is another matter to suggest that such taxpayers may also insist, as a condition of compliance, that information that evidences serious criminality or a public risk will also be the subject of protection.”

The Constitution and the protection it affords were never intended to be used as an “impermeable shield to protect an individual from scrutiny”.

Dario Milo, a partner at law firm Webber Wentzel which acted for the media groups, says the case significantly advances the jurisprudence on access to information and media freedom.

He emphasises that this will not open the floodgates for people wanting to access the tax records of any taxpayer. The thresholds remain high, he adds.

The Constitutional Court gave Thompson one month from the date of the order to supplement his request for access to information relating to the tax returns from 2010 to 2018.

High thresholds to meet

Kyle Mandy, tax technical partner at PwC, says the bar is set at a very high level. As the judgment points out, the first requirement relating to a contravention of the law is in itself a high threshold to meet.

Sars would need to be satisfied that the records sought reveal evidence of a substantial contravention of the law. Sars will also have to be satisfied that the public interest in disclosure clearly outweighs the harm. The only plausible reason why access may not be granted would be that there is no evidence of a substantial contravention of the law.

“The difficulty with this requirement is that the only persons who would know would be Sars and the taxpayer himself, so how an applicant would challenge this remains to be seen,” says Mandy.

“I would expect that unless the contravention was minor the only consideration that they would take into account is the public interest,” he adds. If Sars does allow access it will have to notify Zuma of the decision. He could then further delay the process through internal appeals and applications to the courts.