Ruling on taxpayer confidentiality hailed as boost for legal system
• Public protector Mkhwebane was obstinate and ignorant when she issued subpoena to SA Revenue Service for Zuma’s tax information, says expert
he Pretoria high court’s decision that the public protector ’ s powers of subpoena do not trump the taxpayer confidentiality provisions in legislation is a victory for the principled application of the rule of law in SA, tax and law experts say.
The court found that public protector Busisiwe Mkhwebane acted recklessly by issuing a subpoena to force the SA Revenue Service (Sars) to divulge the tax information of former president Jacob Zuma in contravention of the Tax Administration Act.
Sars sought legal clarity after continued attempts by Mkhwebane to obtain Zuma’s tax information from it as part of her investigation into allegations that he received monthly payments from Royal Security at the start of his term as president.
It has always been open to the public protector to approach Zuma directly for his consent to access his records or to approach the courts for an order directing disclosure, says Ruan Kotze, a member of the Cape bar and advocate of the high court of SA.
“She was both obstinate and ignorant in her refusal to pursue
Tthe courses of action legally available to her after having been expressly advised to do so,” he says. “It is therefore not the case that the taxpayer confidentiality provisions contained in the [act] stymied the public protector’s ability to perform her duties,” says Kotze.
In welcoming the judgment, Sars commissioner Edward Kieswetter pointed out that though the case involved a former president, confidentiality applies to every taxpayer equally.
He said in a statement the entire tax base stands to benefit from this authoritative pronouncement. The judgment confirms fundamental principles of the confidentiality of taxpayer information, the first of which is that taxpayer information is “sacrosanct”.
“Without the statutory guarantee of confidentiality, the expectation that the taxpayer will be candid and accurate with
Sars diminishes,” he says.
Furthermore, all Sars officials take an oath or make a solemn declaration to comply with the statutory confidentiality provisions. By divulging taxpayer information, they are in breach of the provisions of the act and are committing a criminal offence, says Kieswetter.
Kotze says taxpayer confidentiality is the central social contract on which SA’s self-assessment tax system is premised. “It should be protected, for without it the centre cannot hold.”
LAW ENFORCEMENT
He says it is understandable that people are angry and frustrated by the lack of legal consequences for the injuries the country sustained during the lost Zuma years but Sars is “not a law enforcement agency and the public should not expect it to provide possibly incriminating evidence directly into the public domain.
“Where the wheels of the criminal justice system are moving too slowly, the public should focus its impatience on the law enforcement agencies involved,” says Kieswetter.
The act specifically provides that Sars may divulge taxpayer information to the police and the National Prosecuting Authority (NPA) if the information requested relates to civil or criminal proceedings under a tax act.
Regarding remarks and requests for litigation to persuade the courts that the act should include some kind of “public interest” ground for Sars to divulge taxpayer information, Kotze says it would “be an example of a difficult case making bad law and would serve to undermine the integrity of the revenue collection system”.
Kotze says if litigation succeeds, there is a concern the provision may result in a “broadly worded public interest” criterion. “The risk here is that a test so created could in future be used in different contexts, other than ensuring that alleged corrupt politicians disclose their tax returns.”
One can only imagine how a judge-made provision may be used to procure the tax returns of companies or individuals under the guise of public interest, he warns.
The correct approach from a jurisprudence point of view is “to leave it to parliament to legislate such a public interest criterion for access to taxpayer records — as some other countries have done”.
The relevant law enforcement agencies should be held accountable to do their duties, instead of seeking to blur the lines and expecting Sars to perform functions that are manifestly beyond its purpose, says Kotze.
Joon Chong, tax partner at Webber Wentzel, says the judgment has clarified unequivocally that the confidentiality of taxpayer information is a constitutional right that must be protected.
The fact that the public protector persisted with the subpoena, despite explanations from the Sars commissioner that he was constrained from disclosing taxpayer information in terms of the act, and despite contrary advice obtained from senior and junior counsel, is worrying, says Chong.
Judge Peter Mabuse said in his judgment Mkhwebane had acted recklessly by doing so. The conclusion was inescapable that the public protector was “irrational, unreasonable, acted unlawfully and had very little regard to the constitution and the law”, he said.
SHE WAS BOTH OBSTINATE AND IGNORANT IN HER REFUSAL TO PURSUE THE COURSES OF ACTION LEGALLY AVAILABLE TO HER
WHERE THE WHEELS ARE MOVING TOO SLOWLY, THE PUBLIC SHOULD FOCUS ITS IMPATIENCE ON THE LAW ENFORCEMENT AGENCIES INVOLVED