Media wins as court scraps blanket tax secrecy
After a three-year battle for Zuma’s tax records, the Constitutional Court has found that an absolute ban on such records is unconstitutional
In a judgment stemming from the FM and amaBhungane’s request for former president Jacob Zuma’s tax records from 2010 to 2018, the Constitutional Court has effectively struck down the absolute rule that tax information must always remain secret, irrespective of the public interest.
In agreeing with the argument of the media, and finding against the South African Revenue Service (Sars) and Zuma, the Constitutional Court has scrapped a blanket position that goes back decades.
The Constitutional Court judgment is the final ruling in a three-year battle by the publications to get access to Zuma’s tax records, based on claims made in Jacques Pauw’s book The President’s Keepers that Zuma submitted no tax returns for seven years of his presidency, received “donations” from illicit sources and owed millions in back taxes.
Though Sars rejected the FM and amaBhungane’s Promotion of Access to Information
Act (Paia) request for Zuma’s tax records, high court judge Norman Davis ruled in November 2021 that the publications must be given access to these records within 10 days, given the public interest issues. Sars appealed to the Constitutional Court.
The court’s majority ruling this week, written by justice Jody Kollapen, said it “cannot be said to be reasonable and justifiable in an open and democratic society” that such an absolute right to tax secrecy exists, even in circumstances where a clear public interest has been demonstrated.
Paia does allow for some information like medical records to remain confidential. But it also says this information can be disclosed in certain circumstances, such as if the public interest in that disclosure outweighs the harm in revealing it. Until now, taxpayer information was the sole exception: no “public interest override” was allowed, ever.
Kollapen’s judgment, by declaring certain sections of Paia and the Tax Administration Act unconstitutional, changes this.
“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 wrote. “It is difficult to conceive any reasonable basis to hold that taxpayer information cannot be subject to the ‘public interest override’ in circumstances where the override is potentially available to justify the disclosure of information that may relate to the life and the safety of an individual, the defence or the security interest of the country, or the private information of a third party.”
In the hearing, Sars commissioner Edward Kieswetter had argued that “without this guarantee of confidentiality, the expectation that the taxpayer will be candid and accurate with Sars diminishes”.
But Kollapen rejected this argument.
“There is no basis in principle, nor in terms of any evidence, 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.”
Taxpayers comply with the requirements not because of the secrecy rules, he said, but rather because of the “serious financial and criminal consequences of noncompliance”.
Kollapen said the FM and amaBhungane should now submit a new request to Sars “to deal with afresh, in the light of this judgment”.
It’s a crucial victory, ensuring that the public interest trumps secrecy when it comes to tax cases. The court has now given parliament two years to fix the legislation.
Still, the judgment wasn’t unanimous: while five justices including Kollapen agreed with the media’s case, four agreed with Sars and Zuma.
But Kollapen’s judgment is clear that removing the blanket secrecy provisions doesn’t throw open the gates to anyone seeking to access anyone else’s tax records.
Rather, it says it is only where a clear “public interest” has been shown such as a “substantial contravention of, or failure to comply with, the law and that public interest outweighs the potential harm of releasing that information, then the tax authority must release those records.
Kollapen wrote: “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.”
Balancing the rights of freedom of information against the right to privacy was the main point of contention in the Constitutional Court hearing, which took place last August.
Steven Budlender SC, acting for the FM and amaBhungane, argued at the time that the publications “seek only a limited exception to the principle
one which would leave untouched the confidentiality of the overwhelming majority of taxpayer information”.
Rather, he said, this was about a “very small number of cases where there has been a serious breach of law, and would manifestly be in the public interest.”
After the judgment, Kieswetter said Sars is “applying our mind to the exact implications”. He reiterated that the ruling doesn’t set aside taxpayer confidentiality provisions, but rather sets a high threshold to meet when tax information is sought.
“We respect the findings of the court … Any request made under Paia for the tax records of a taxpayer will be judiciously scrutinised within the parameters set by the Constitutional Court,” he said.
Dario Milo, a partner at Webber Wentzel, which acted for the media houses, described this ruling as a “significant victory for openness, transparency and the right of the public to know matters of public interest”.
The FM and amaBhungane will now resubmit the Paia request to Sars, which will have to consider whether the public interest override applies. But either way, the import of this week’s judgment is that at least one avenue to diminish transparency has been closed.