CONSTITUTIONAL COURT OF SOUTH AFRICA Arena Holdings (Pty) Ltd and Others v SARS and Others
CCT 365/21 Date of hearing: 23 August 2022 ________________________________________________________________________
MEDIA SUMMARY
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The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.
On Tuesday, 23 August 2022 at 10h00 the Constitutional Court will hear an application for confirmation of a declaration of invalidity by the High Court of South Africa, Gauteng Division, Pretoria (High Court). The High Court declared sections 35 and 46 of the Promotion of Access to Information Act 2 of 2000 (PAIA) as well as sections 67 and 69 of the Tax Administration Act 28 of 2011 (TAA) unconstitutional to the extent that they preclude access to tax records by a person other than the taxpayer even in circumstances where the requirements set out in subsections 46(a) and (b) of PAIA are met, and prohibit the further dissemination of tax information obtained as a result of a PAIA request. The High Court further ordered the South African Revenue Service (SARS) to furnish the applicant, Arena Holdings (Pty) Ltd (Arena) t/a Financial Mail and its associates, with Mr Jacob Gedleyihlekisa Zuma’s (Mr Zuma) individual tax returns for the 2010 to 2018 tax years within ten days of the order.
The confirmation proceedings are opposed by the respondents, that is, SARS, Mr Zuma, the Minister of Justice and Correctional Services (Minister of Justice) and the Minister of Finance. The Information Regulator (Regulator), the fifth respondent, which is the authority tasked with monitoring and enforcement of PAIA, has filed submissions to assist the Court. The Regulator supports the confirmation of the High Court’s order of invalidity and as well as the reading-in remedy ordered by the High Court.
At the beginning of 2019, Mr Thompson – an employee of Arena – applied to SARS, in terms of PAIA, to gain access to Mr Zuma’s tax records. The basis for the application was the allegations that Mr Zuma had not been tax compliant during his tenure as President.
On 19 March 2019, SARS refused to disclose the documents on the grounds of Mr Zuma’s
entitlement to confidentiality under sections 34(1) and 35(1) of PAIA as well as section 69(1) of the TAA. An internal appeal against the refusal was dismissed on 30 March 2019 on the same grounds.
On 25 November 2019, the applicants launched an application in the High Court and challenged the constitutionality of the statutory prohibition of the disclosure of a taxpayer's tax information held by SARS, in circumstances where such disclosure could reveal evidence of substantial contravention of the law and would be in the public interest. The applicants also sought an order directing SARS to grant them access to Mr Zuma’s tax records for the 2010 to 2018 financial years.
The High Court held that the notion that voluntary disclosure and taxpayer compliance is inextricably linked to or dependent on the taxpayer secrecy regime is not a universal truth.
The High Court stated that there are various foreign jurisdictions which have less restrictive tax record access regimes and whose tax administration is not hampered by the relaxed access to tax information. The High Court weighed the taxpayer’s right to privacy against the public’s right to freedom of speech and to access to information. It held that the preclusion of access to tax information imposed by sections 35 and 46 of PAIA and sections 67 and 69 the TAA amounted to a blanket prohibition, and the rights to freedom of speech and to access to information were unjustifiably limited.
In the result, the High Court declared sections 35 and 46 of PAIA and sections 67 and 69 of the TAA unconstitutional. It granted a reading-in relief in terms of which it provided a public-interest override clause into the provisions, to the effect that the disclosure of tax information to anyone other than the taxpayer will be permitted where such disclosure would reveal substantial contravention of the law and be in the public interest, as set out in section 46 of PAIA. The High Court further substituted SARS’ refusal to grant the applicants access to Mr Zuma’s tax records and ordered SARS to grant access to the applicants as sought. The applicants have now approached the Constitutional Court for confirmation of this order.
The applicants submit that the impugned provisions of the PAIA and TAA impose an absolute prohibition on disclosure of tax information of a taxpayer held by SARS to a PAIA requester other than the taxpayer concerned. According to the applicants, this prohibition is unconstitutional insofar as it unjustifiably limits the right of access to information, under section 32(1) of the Constitution, and the right to freedom of expression, under section 16 of the Constitution. The applicants submit that applying the public-interest override, as contained in section 46 of PAIA, to the impugned provisions would be in order and would not contravene South Africa’s international obligations.
On the High Court’s order of substitution, the applicants submit that the High Court was correct in applying the public-interest override to Mr Zuma’s tax returns and ordering their disclosure. The applicants contend that the matter before the High Court also included a challenge to SARS’ refusal to grant Mr Thompson access to Mr Zuma’s tax records, and that, in terms of section 82 of PAIA, the High Court was empowered to confirm, amend or set aside SARS’ decision. According to the applicants, the standard of review applicable
to their application was broad enough to enable the High Court to engage in a de novo reconsideration of the merits.
SARS submits that the applicants’ constitutional challenge is unfounded. SARS submits that the regimes created by the TAA and PAIA were established after extensive consultation and careful consideration, and that these statutes strike a fair and reasonable balance between the right to privacy and the right to access to information in and of themselves. According to SARS, the impugned provisions serve to protect taxpayer confidentiality and maintain tax compliance. SARS submits that extending the section 46 public-interest override to tax information will substantially undermine taxpayers’
confidence in SARS as well as tax compliance.
SARS refutes the contention that impugned provisions create a blanket ban on access to tax information and submits that the provisions are subject to narrowly circumscribed and tightly controlled exceptions. SARS submits that permitting the disclosure of taxpayer information to the media and public under section 46 of PAIA unduly limits taxpayers’
rights to privacy and contravenes South Africa’s international law obligations.
Additionally, SARS submits that the question whether tax information should be subject to disclosure under PAIA is polycentric. SARS seeks a dismissal of the confirmation application. However, should the Constitutional Court confirm the declaration of invalidity, SARS submits that a just and equitable remedy would be to suspend the declaration of invalidity for a period of two years to allow Parliament to cure the defect.
The second respondent, Mr Zuma, submits that the High Court incorrectly accepted the factual basis of the applicants’ case. He submits that the applicants’ reasons for requesting his tax information are premised on allegations of non-compliance made in the book titled
“The President’s Keepers”. Mr Zuma submits that the basis for the applicants’ case is not based on credible evidence as the book they relied on does not contain any factual and evidential material that would demonstrate that he violated his tax obligations.
Mr Zuma submits that, although he did not participate in the High Court proceedings, he has grounds to oppose the confirmation application as its outcome will directly affect him.
Further, the relief sought by the applicants arbitrarily violates his right to privacy and dignity. Mr Zuma submits that the order of the High Court which directed SARS to release his tax information is incompetent as the declaration of invalidity, upon which the order was based, would have to be confirmed by the Constitutional Court before it can have any effect.
The Minister of Justice submits that the High Court misdirected itself. The Minister echoes SARS’s submissions that maintaining the confidentiality of taxpayer information is central to tax administration and is in the public interest, and that the impugned provisions do not impose an absolute prohibition of disclosure of tax information. The Minister further submits that the High Court incorrectly relied on hearsay evidence from The President’s Keepers in its reasoning, and that, in any event, there is no public interest in the disclosure of Mr Zuma’s tax information as he is an ordinary citizen and no longer the President of the Republic of South Africa.
The Minister of Finance submits that the High Court did not consider his arguments and evidence, and that the High Court failed to lay a basis for declaring sections 67 and 69 of the TAA constitutional invalid. The Minister also submits that the High Court failed to take cognisance of public policy considerations, in that the confidentiality of information is critical for effective tax administration and the subsistence of the voluntary compliance policy. Like SARS and the Minister of Justice, the Minister of Finance contends that the prohibition of disclosure of tax information is not absolute as it is subject to some exceptions.
Additionally, the Minister avers that the order of substitution – ordering the release of Mr Zuma’s tax – is contrary to the string of case law that has been developed on this issue and that the applicants have not satisfied the test laid out for a competent substitution. The Minister of Finance submits that, in the event that the Constitutional Court confirms the declaration of invalidity, the order should be suspended for 24 months to allow the Legislature to remedy the defect.
TheRegulator does not oppose the confirmation proceedings and has filed a notice to abide by the decision of the Constitutional Court. The Regulator has also filed an explanatory affidavit and written submission to assist this Court in its decision. The Regulator submits that section 35 of PAIA provides SARS with the absolute right of refusal of access to tax records. According to the Regulator, even though this right of refusal is bestowed by legislation, it is contrary to the conditions under which the right to access information may be justifiably limited, as prescribed by section 36 of the Constitution.
