Tax records are understood to be private. As well they should be. But not in all circumstances, without exception, ever – especially where there is a compelling public interest in disclosure.

Say, for instance, where a former president is alleged to have flouted the country’s tax laws during his term of office.

That was the argument raised by the Financial Mail and amaBhungane in the High Court in June this year, the same argument that has – in a great victory for access to information in the public interest – been accepted by the court.

On Tuesday, Judge Norman Davis handed down a long-awaited judgment in our court challenge against blanket tax secrecy. Rather than a sea change to the privacy of tax information submitted to the South African Revenue Service (SARS) by taxpayers, the judgment tweaks the existing legal regime in a small, but impactful way.

In doing so, it ensures that the right of access to information in the public interest is balanced appropriately against the right to privacy, as the Constitution requires.

Here are the main takeaways from the judgment:

• The law doesn’t do enough to recognise transparency

The legal regime set out in the Tax Administration Act (TAA) and the Promotion of Access to Information Act (Paia) provides that information submitted to SARS is generally not disclosable, subject to a few limited exceptions, usually only as part of tax recovery proceedings. 

Crucially, under current provisions, Paia’s “public interest override” does NOT apply to the TAA’s non-disclosure rules. (The Paia override is a safety valve whereby, under certain circumstances, the information officer must disclose information that he or she would normally be entitled to withhold.)

The effect of these provisions taken together has been blanket official secrecy on tax matters. Anyone seeking access to such information faces an impenetrable legal wall.

This was precisely the situation that the Financial Mail and its journalist Warren Thompson found when they requested access to former president Jacob Zuma’s tax records for the years 2010 to 2018.

They had sought access based on several allegations about Zuma’s tax affairs contained in Jacques Pauw’s book The President’s Keepers, including that he owed millions of rand in tax for the fringe benefits he received as a result of “security upgrades” to his Nkandla residence, and that he had received “donations” from illicit sources, including the Gupta family.

Clearly, the public has an interest in knowing if this was the case, and if so, the extent of the wrongdoing.

The circumstances gave rise to a clash of rights: a taxpayer’s right to privacy against the right of access to information; the media’s right to freedom of expression as well as the right to receive and impart information.

The court had to consider whether the blanket secrecy provisions in the TAA and Paia limit the right of access to information in a constitutionally justifiable matter.

In short: they don’t.

The court endorsed the view that “free access to official [state-held] information is a prerequisite for public accountability and an essential feature for participatory democracy” and so there may be circumstances where the public may have a legitimate interest in a person’s tax affairs sufficient to justify an impingement on privacy.

The flipside was that the application of a public interest override to limit confidentiality of taxpayer’s information is a justifiable limitation of rights.

• No, your tax records won’t be made public

Since the judgment was issued, alarmists have been trumpeting that taxpayer confidentiality is well and truly dead. They are wrong.

Davis’s judgment recognises the “general consensus that the general limitation of access to taxpayer information held by SARS, imposed by a law of general application [the TAA], is justified in an open and free democratic society”.

We did not argue against this general position. Rather, we argued that the door shielding the confidentiality of these records be opened only by the smallest crack, through allowing the public interest override in section 46 of Paia to apply.

Section 46 sets up legal hurdles that must be cleared before records which fall within the categories of information protected from disclosure under Paia can be disclosed.

They are not easy hurdles to clear.

This is shown by the various qualifying words used. 

The records must only be disclosed if they would reveal a substantial contravention of, or failure to comply with the law; or an imminent and serious public safety or environmental risk.

In addition to either of the above requirements being satisfied, there is a mandatory balancing of interests: the public interest in the disclosure of the records must clearly outweigh the harm contemplated flowing from the disclosure.

The public interest does not necessarily refer to what the public finds interesting. Rather, as the Constitutional Court has pointed out, the public interest is “attached to a legitimate and genuine interest, one founded on fact and one that contributes towards the public’s constitutional right to be informed”.

The effect of this is that the average law-abiding taxpayer would have no reason to expect their tax information to be made public. Nor would the average non-law-abiding taxpayer for that matter. The legal test would simply not be satisfied.

So no, your tax records will not be splashed around the media as a result of this ruling. Unless, of course, you are a person in a position of power involved in rather serious malfeasance, and – crucially – the public interest in knowing about your tax affairs is so great that it justifies limiting your privacy.

Under such a scheme, SARS would usually be the entity making the decision.

In this case, perhaps because Zuma did not oppose the application, Judge Davis opted to make this decision rather than refer the matter back to SARS.

• Tax information isn’t sacrosanct

One of SARS’s main arguments in its attempt to preserve the blanket confidentiality of taxpayer information was that there is a “compact” between taxpayers and SARS – that in exchange for taxpayers providing truthful, complete disclosure, SARS keeps their secrets.

In its evidence, SARS made much of this point, going so far as to say that the compact is the very “foundation of the tax system, without which the tax system cannot properly function”.

Davis rejected this assertion with the observation that it is not due to the secrecy provisions that taxpayers disclose their affairs to SARS – rather, it is the “coercion of the penalties and sanctions which follow upon non-disclosure”.

While this conclusion seems obvious, the court reached it after consideration of all the evidence put forward by SARS, including examples from other countries and academic literature. Even so, the court could not find any direct or factual evidence to back up SARS’s claims.

It bears considering whether tax information should be treated differently to any other sensitive information. Is it somehow more deserving of confidentiality than, say, the content of hearings by asylum-seekers, which the Constitutional Court held could not be held in secret without exception?

What about information that comes to light during divorce proceedings? Such information is extremely personal to the parties, potentially revealing intimate details of their lives. Yet even there, the Constitutional Court held that an absolute bar to access to such information cannot be countenanced in terms of the law.

In certain cases, the public interest should prevail.

The application of the public interest override to requests for taxpayer information is therefore in line with the jurisprudence of our courts, which generally abhors absolute prohibitions in matters of access to information and media freedom.

• There are material differences between our case and the Public Protector’s

Why was the Public Protector refused access to Zuma’s records but our application succeeded?

Many will recall the rather scathing judgment handed down by Judge Peter Mabuse of the North Gauteng High Court last year, which declared that the public protector’s subpoena powers do not extend to taxpayer information. It also declared that SARS is permitted and required to withhold taxpayer information from the public protector, due to the operation of the “just cause” provision contained in the Public Protector Act (PPA).

The essential difference between the public protector’s claim and ours is that her claim was premised on her powers under the Constitution and the PPA, whereas ours was grounded on fundamental rights sourced in the Bill of Rights.

The PPA grants the public protector certain subpoena powers to compel persons to provide information under pain of criminal sanction – unless they have just cause to refuse.

The confidentiality provision of the TAA, as a provision of national legislation, is one such just cause. The Public Protector cannot compel SARS to provide information that the law expressly prohibits them from providing. Her powers do not extend that far.

The public’s (and the media’s) right to request information is set out in the Bill of Rights and Paia. 

It is founded on human rights, which is fundamentally different to the public protector’s subpoena powers. This is why our case came down to the balancing of rights under the Constitution’s limitations clause, rather than an assessment of empowering provisions.

• There are material differences between this case and that seeking bank records of the CR17 campaign

The Economic Freedom Fighters (EFF) applied last year to the High Court to overturn a court order sealing a Financial Intelligence Centre (FIC) report referred to in the public protector’s report into Cyril Ramaphosa’s campaign for election as ANC president. This report formed part of the rule 53 record when her report was taken under review.

The EFF argued that the records should be unsealed in the public interest, asserting that “the constitutional right to privacy is not absolute… it is necessarily limited by the legitimate interest of others and the public interest”.

In July this year, the high court refused to grant the unsealing order, due to several defects in the EFF’s case. These include the EFF “fail[ing] to adequately state on the papers how its rights had been affected, if at all”. Further, the EFF had not responded to Judge Aubrey Ledwaba’s call for any party that wished to challenge the sealing directive to do so – and once sealed, the record no longer formed part of the court record.

Importantly, the court distinguished this application – brought by a rival political party – from other freedom of expression cases brought by the media, noting that in the circumstances, it was worth considering whether this was a matter squarely within the public interest, or merely interesting to the public.

Another differentiating aspect was how the record came to be sealed in the first place: the public protector had ignored safeguards imposed by the director of the FIC when it provided its report to her which she filed as part of her rule 53 record.

The court was, as a result, unable to identify any right of the EFF or interests of justice that warranted the disclosure.

The CR17 matter was therefore not squarely about the balancing of rights, as was our tax records litigation. 

AmaBhungane was cited as a respondent in the matter. We elected to abide by the court’s decision and intentionally did not wade into the merits of the EFF’s claim. Rather, we made submissions on the principle of open justice, emphasising that certain legal principles apply to the sealing (or unsealing) of records.

These included that the default position is openness, not secrecy, and that:

“Whenever a court is confronted with a choice between putting up a veil of secrecy or opening up records to public scrutiny, openness should always prevail save for extremely rare cases where the most compelling need for secrecy is established and where this outweighs the strong reasons for openness that always apply.”

The EFF has indicated its intention to appeal the High Court’s decision. If so, we will continue to advocate before the courts that in all matters concerning secrecy, established constitutional principles concerning transparency should be given due regard.

• The next steps

Zuma will now have to live with the choice he made not to oppose the application. The audi principle in our law requires that the other side be given an opportunity to be heard. However, if they choose not to exercise that opportunity, they must bear the consequences.

The chances of the Constitutional Court entertaining an appeal by Zuma himself are slim.

It is no surprise that the Jacob Zuma Foundation has now called on SARS to appeal the decision. 

As SARS’s interests in maintaining confidentiality of all taxpayers’ information aligns with Zuma’s interests in these particular circumstances, it is through SARS that Zuma’s last chance to shield his tax affairs from the public lies.

Davis’s order had two main prongs: first, it declared the blanket prohibition on disclosure of tax records to be unconstitutional and invalid. His order suspended the declaration of invalidity for two years, to give Parliament time to remedy the defect. In the interim, he read words into the legislation.

As required by the Constitution, the declaration of invalidity has been referred to the Constitutional Court for confirmation.

He also ordered SARS to provide access to the court records of Zuma for the years 2010 to 2018 in 10 business days.

It is expected that SARS will appeal the decision, meaning that it’s likely that a further fight is brewing – though from our perspective, there’s no fight at all. It’s clear that there are more than enough reasons for the Constitutional Court to confirm the declaration of invalidity and give due recognition to transparency in the public interest. DM

Cherese Thakur is an attorney and amaBhungane’s advocacy coordinator.