- Landmark Ruling: The Constitutional Court of South Africa has delivered a significant judgment on a case involving tax confidentiality and the right to access information. The case was initiated after a request to access the tax records of the former President was declined by SARS.
- Constitutional Invalidity: The Court found certain provisions of the Promotion of Access to Information Act (PAIA) and the Tax Administration Act 28 of 2011 (TAA) to be constitutionally invalid. It ordered Parliament to address these invalidities within 24 months and implemented a “read-in” to the PAIA and TAA until such remedies are made.
- Balancing Transparency and Confidentiality: The ruling sets a high threshold for accessing a taxpayer’s records, balancing the need for transparency and accountability with the importance of maintaining taxpayer confidentiality. SARS Commissioner assured that any request for tax records will be judiciously scrutinised within the parameters set by the Court.
In a landmark ruling, the Constitutional Court of South Africa has delivered a judgment on the case of Arena Holdings and others v South African Revenue Service (SARS) and another, Case No 365/21. The case, which has been closely watched by legal and tax professionals alike, revolves around the issue of tax confidentiality and the right of access to information.
The case was initiated following a request to access the tax records of the former President of the Republic of South Africa. The request, made under the Promotion of Access to Information Act (PAIA), was declined by SARS, citing legislative prohibitions that prevented them from acting otherwise.
In its ruling, the Constitutional Court has found certain provisions of the PAIA and the Tax Administration Act 28 of 2011 (TAA) to be constitutionally invalid. The Court has ordered Parliament to consider measures to address these constitutional invalidities within the next 24 months. Until such time as Parliament remedies these invalidities, the Court has ordered a “read-in” to the PAIA and the TAA.
The “read-in” provisions stipulate that SARS must consider whether the disclosure of the record would reveal evidence of a substantial contravention of, or failure to comply with, the law, or whether the disclosure would reveal evidence of an imminent and serious public safety or environmental risk. Furthermore, it must be determined whether the public interest in making the disclosure clearly outweighs the harm.
While the ruling does not set aside the tax confidentiality provisions, it does set a high threshold for when access is requested to the tax records of a taxpayer. This is a significant development, as it balances the need for transparency and accountability with the importance of maintaining taxpayer confidentiality.
SARS Commissioner Edward Kieswetter has stated that while SARS is considering the full implications of the judgment, taxpayer confidentiality remains a fundamental aspect of their administration. He assured taxpayers that any request made under PAIA for the tax records of a taxpayer will be judiciously scrutinised within the parameters set by the Constitutional Court.
“We respect the findings of the Court, and are applying our mind to the exact implications for SARS and taxpayers,” said Commissioner Kieswetter. “We must guard against any frivolous abuse of the provisions set out by the Constitutional Court.”
This ruling marks a significant shift in the landscape of tax confidentiality and access to information in South Africa. It underscores the importance of balancing the need for transparency with the protection of individual privacy. As we await the response from Parliament, it is clear that this ruling will have far-reaching implications for the future of tax administration in the country.