Constitutional Court rules sections of PAIA and Tax Administration Act unconstitutional

Facts

Driven by allegations that former President Jacob Zuma (Zuma) had failed to disclose income sources and evaded tax during his presidency, Mr Warren Thompson (Thompson), a financial journalist employed by Arena Holdings at the time, applied to SARS for access to Zuma’s tax returns under the Promotion of Access to Information Act No. 2 of 2000 (“PAIA”) in early 2019. SARS denied Thompson’s application to access the said records, claiming that Zuma’s was entitled to confidentiality under sections 34(1) and 35(1) of PAIA and section 69(1) of the Tax Administration Act 28 of 2011 (“TAA”).

The relevant sections under PAIA

Section 35(1) of PAIA precludes the disclosure by SARS of information collected by it for purposes of enforcing tax legislation.

Section 46 of PAIA, however, outlines the “public interest override” that requires disclosure of otherwise protected information if such disclosure would reveal evidence of “a substantial contravention of the law or failure to comply with the law” or “an imminent and serious public safety or environmental risk” and “the public interest in the disclosure of the record clearly outweighs the harm contemplated in the provision in question”.

Internal appeal against SARS

Thompson then launched an internal appeal against SARS’ refusal, but this was dismissed by SARS on the same grounds.

Consequently, Thompson and two other applicants filed an application in the high court to (i) challenge the constitutional validity of the aforesaid sections of PAIA and the TAA that prohibit disclosure of a taxpayer’s tax information and to (ii) compel SARS to disclose Zuma’s tax returns by virtue of the public interest override.

The applicants’ main argument was that the prohibition should not apply when disclosure of such tax records could reveal substantial contraventions and violations of the law and be held to be in the public interest. The high court declared sections 35 and 46 of PAIA unconstitutional and invalid 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 sections 46(a) and (b) of PAIA are met.

Next step: Constitutional Court

The applicants then approached the Constitutional Court (CC) to confirm the declaration of invalidity made by the high court. The applicants submitted that there is an absolute prohibition on the disclosure of tax information of a taxpayer held by SARS to a requester other than the taxpayer concerned. They contended that these prohibitions prevent the media from obtaining tax information from SARS through PAIA and reporting thereon “even if the information contains conclusive evidence of corruption, malfeasance, or other lawbreaking.” They further submitted that the limitation of the rights in sections 16 and 32(1) of the Constitution is not justifiable under section 36 of the Constitution.

Judgment

On 30 May 2023, the CC in Arena Holdings (Pty) Limited t/a Financial Mail and Others v The South African Revenue Services and Others:

• declared that sections 35 and 46 of the PAIA and 67 and 69 of the TAA are constitutionally invalid to the extent they contain a blanket prohibition of disclosure of taxpayer information collected by SARS to a person other than the taxpayer, even when such disclosure would satisfy the requirements of the PAIA’s “public interest override”;
• suspended the declaration of invalidity for a period of 24 months to enable Parliament to address the constitutional invalidity;
• referred the third applicant’s request for access to former President Jacob Zuma’s tax returns back to SARS for a fresh determination.

In conclusion, the CC highlighted the need to balance the right to privacy with the rights of access to information and freedom of expression. This judgment no doubt contributes to the enhancement of transparency in public bodies and reinforces the constitutional right of access to information.