The South African Revenue Service (Sars) has approached the constitutional court for direct leave to appeal a far-reaching high court order compelling it to hand over Jacob Zuma’s tax returns for his time as president to two media houses.
The deadline imposed by Judge Norman Davis for Sars to release his tax returns for the period from 2010 to 2018 to the Financial Mail and AmaBhungane expires on Tuesday, 30 November.
Sars filed papers on 29 November, signalling its intention not only to appeal the order but to appeal for confirmation of the constitutional invalidity of sections 67 and 69 of the Tax Administration Act and sections 35 and 46 the Promotion of Access to Information Act (Paia).
Sars commissioner Edward Kieswetter said the two were inextricably linked and the revenue service’s application to appeal the order itself “clearly engages a constitutional issue”.
This was so because Davis’s directive to release Zuma’s tax records rested squarely on his finding that the legal provisions were unconstitutional, and this finding was now before the apex court for confirmation.
Davis held that a blanket ban in law on the release of tax records in Paia and the Tax Act limited the right to freedom of information in a manner that did not pass constitutional muster. Sars had an onus to prove otherwise, and did not meet it, he said.
Kieswetter said that should the appeal on giving the media access to the records be heard by the high court, the matter would likely end up in the supreme court of appeal, and ultimately in the constitutional court.
In the meanwhile the very foundation for the order to release the records — the finding of unconstitutionality — would already be at issue in the apex court.
“It would, I submit, be an unnecessary waste of judicial resources, and not in the interests of justice, to have piecemeal litigation, which would be necessitated by proceeding in the ordinary course.”
Kieswetter added that Davis was not competent to order the release of the records until the constitutional court had confirmed the invalidity of the relevant sections of the law.
Where it began
The wrangle over Zuma’s tax records began with allegations that he received money from the Gupta family as well as a stipend from a security company, never paid fringe benefit tax on the state-funded upgrades to his Nkandla home and never filed tax returns in his first seven years in office.
When Financial Times journalist Warren Thompson filed a Paia application to see his tax records, Sars refused, as it had to, because the public interest override in section 46 of the Act does not apply to taxpayer information.
It allows for the release, under exceptional circumstances, of information relating to national security and trade secrets, but casts an absolute veil of secrecy around tax records. The two media entities went to court, arguing that the limitation it posed on access to information was not justifiable in an open, democratic society.
Sars’ pact with taxpayers
Sars opposed their application, as did the ministers of justice and finance. The revenue service argued that blanket secrecy enshrined in law was essential to preserve a pact between the revenue service and taxpayers whereby, in return for their full and honest disclosure, “Sars promises to keep their secrets”.
“Without this statutory guarantee of confidentiality, the expectation that the taxpayer will be candid with Sars diminishes. The compact, written into law … is the foundation of the tax system, without which the tax system cannot function properly.”
But Davis said there was cause to doubt that this was the real mechanism whereby the revenue service ensured compliance. It was far more likely that taxpayers complied for fear of prosecution, rather than as a trade-off for protecting their privacy.
He held that the limitation imposed on freedom of information as protected under section 32 of the Constitution was not justified, whereas extending the public interest override to such information was justified.
Accordingly, he found that sections 35 and 46 of Paia were unconstitutional in precluding access to tax records, even where the normal requirements for public interest disclosure have been met.
Sections 67 and 69 of the Tax Administration Act were similarly unconstitutional where they precluded disclosure even when these requirements were met, and further precluded anybody from publishing tax information obtained by way of a Paia application.
Davis suspended the ruling for two years to allow parliament to amend both, but ordered that in the interim provisions to give effect to the ruling should be read into the two Acts.
The ruling has sparked much debate, with one commentator arguing that it would become a “pernicious weapon in the hands of the dark side of the media”. It would, the argument went, not only hamper the investigation of tax evasion, but turn the release of tax records into a political tool.
Dario Milo, a senior partner at Webber Wentzel, the law firm representing the media in the matter, countered that the ruling did not dislodge confidentiality as the default position on tax records. Nor did it open the floodgates for random release of tax affairs, or allow the media to publish leaked tax information.
Instead public disclosure could only happen in exceptional circumstances, in line with Paia rules, and should the taxpayer in question disagree, he or she could turn to the courts.
In this instance, Zuma did not oppose the application by the media, or file any court papers addressing the allegations that he evaded paying tax. Nor did he attempt to confirm that he was, in fact, tax compliant.