Financial Mail

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

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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.

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Jacob Zuma

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