There are few things that are as well protected in South Africa as the information taxpayers share with the South African Revenue Service (Sars).
The Public Protector learnt that not even several tweets from former president Jacob Zuma giving up his right to have his financial information safeguarded by Sars would convince it to do so.
The court case between Sars and the Public Protector may shed some light on the right of any other authority – besides the ones specifically mentioned in the Tax Administration Act – to obtain taxpayer information from Sars.
During the course of last year, Public Protector Busisiwe Mkhwebane subpoenaed Sars Commissioner Edward Kieswetter, requesting him to disclose confidential information about Zuma’s tax affairs to her office.
Mkhwebane is investigating a complaint from the Democratic Alliance that Zuma allegedly received R1 million of undeclared money.
However, Sars approached the Pretoria High Court asking that the subpoena be set aside and in November last year the court stayed the subpoena.
The parties undertook to engage with the court on the “substantial matter” relating to the disclosure of any taxpayer information to third parties.
Joon Chong, a partner at law firm Webber Wentzel, says the Public Protector Act (PPA) does not give Mkhwebane the authority to subpoena the Sars commissioner for taxpayer information.
The PPA stipulates that she may request any person at any level of government, any person performing a public function, or any person who is subject to the jurisdiction of the Public Protector to assist her in the performance of her functions with an investigation.
She may also “direct any person” to submit an affidavit or declaration to give evidence or to produce any document that has a bearing on the Public Protector’s investigation.
Procedure versus protection
This ‘direction’ must be in the form of a subpoena, and that is exactly what Mkhwebane did in the case of her investigation into Zuma. She subpoenaed Kieswetter to hand over the former president’s tax returns.
However, Sars is relying on Chapter 6 of the Tax Administration Act (TAA) – specifically Sections 69 and 70, which deal with the disclosure of taxpayer information.
Section 69 provides for disclosure of information to, among others, the National Prosecuting Authority (NPA) or the South African Police Service in certain circumstances.
Chong says the wording of the Public Protector Act does not override the confidentiality provisions in the TAA. There would have to be an amendment to the former in order to give her the authority to subpoena the commissioner.
According to Chong, the right to have confidential information protected is fundamental to the constitutional right to privacy – whether the taxpayer is an individual or a company.
A matter of trust
“Sars has wide powers to request anything under the sun dating back many years. It would not be in the interest of institutional trust if information that has been provided to Sars – under the umbrella of confidentiality – can then be provided to the Public Protector or another state institution.”
Kieswetter said at a press conference at the end of last year that the protection of the right to privacy affects every tax-paying South African and it is therefore pertinent to get clarity on when and in which circumstances third parties may request confidential information from Sars.
Chong, who is also a member of the South African Institute of Tax Professionals’ technical tax committee, gives as an example a case where the NPA is prosecuting an individual for alleged criminal activities and requests confidential information from Sars relating to the tax affairs of the individual.
If this information is provided, it could be a violation of an individual’s right against self-discrimination.
It is a different matter if Sars audits a taxpayer, finds there is reason to prosecute and share its information with the NPA for the purpose of the prosecution.
Chong says “on balance” the need to protect confidential information is far greater than the need to have Zuma’s tax returns made public in the investigation against him.
According to Kieswetter the law was drafted with the clear view that the confidentiality of a taxpayer’s information is an overriding public interest when deciding whether to disclose a matter that may be newsworthy.
At the press conference he stressed that it is in every taxpayer’s interest that Sars obtain legal clarity on whether taxpayers have a right to privacy, which concerns the right to confidentiality of all information – personal and financial – held by the tax authority.
Chong says inroads made on the rights of taxpayers to have their financial information safeguarded should be done by way of a legislative amendment.
This will allow for a public participation process where the general public and all stakeholders will have the opportunity to comment on the wording of the statute.
Chong also says the fact that Zuma gave his consent to the Public Protector in a tweet is insufficient.
He should have signed a letter of consent and instructed his tax advisor, if he has one, to hand over his returns and assessments to the Public Protector. Alternatively, if he files his returns himself, he could access both his returns and his assessments through Sars’s eFiling system and hand them over to Mkhwebane himself.