Wednesday, January 26

In a decisive ruling, Sars ordered the release of Zuma’s tax records


The decisive ruling in which the South African Revenue Service (Sars) was given 10 days to disclose the income tax returns of former President Jacob Zuma during his years in office (2010-2018) was handed down a week ago , on November 16.

Moneyweb has discussed the judgment with Patricia Williams, partner of Bowmans, and Keith Engel, executive director of the South African Institute of Taxation.

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Williams says that “the taxpayer secrecy provisions have been a material factor contributing to the loss of confidence in the Sars” and that taxpayers and tax professionals believe that the Sars “hides behind” these rules.

She points out that the Sars has a mandate to “deliver evidence of criminal activities [not tax offences] to the competent authorities … investigate tax crimes, gather relevant evidence and then refer cases for criminal prosecution … collect all relevant taxes, including civil penalties and interest ”.

Read:

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Sars, the public protector and the issue of taxpayer privacy

Williams says that while Sars is primarily auditing compliant taxpayers, there is little public evidence that Sars has targeted “tax evaders and other criminals.”

The Sars raises taxes on the basis of “technicalities” and “time differences”, and “creates the impression that people with political connections are for the most part” untouchable. ”

Williams says: “This ruling does not allow Sars to simply disclose all taxpayer information and may not yet sufficiently relax the taxpayer secrecy provisions. However, it is a stepping stone towards ‘transparency and accountability’ … [that] it is experienced by taxpayers as woefully deficient. ”

‘Critical test’ for Sars

Williams further comments that Sars has engaged in “insufficient action” to restore public confidence in him, and that his response to the ruling is critical evidence of his “commitment to be transparent, accountable and trustworthy.”

She questions whether Sars will accept the ruling, which “allows very limited disclosures in the public interest and paves the way for greater confidence in Sars.”

“Or is Sars going to use the legal system to try to block transparency and accountability?”

‘In the public interest’ requires clarity

Engel says this appears to be “an all or nothing judgment”, and that “in the public interest” it should be contextualized for future judicial precedence.

Engel points out that wealthy citizens do not want their wealth to be exposed in the media; They may be exposed to kidnapping risks and personal liability suites.

In other words, it says that the existence of wealth alone should not be a trigger for public exposure.

He adds that the public has the right to know how their tax money is being spent and if an official is misusing public office. But why should the public know who is evading income taxes or private savings?

Confidential tax information must be exposed and used carefully, otherwise it can get out of control and be misused. The public has a right to know what government officials earn, what their fringe benefits are, and whether they are receiving government contracts. But this should be legislated.

Engel says that Sars is often perceived to only go after the ripe fruit, and not the big tax evaders.

“The patience of the public has run out [Sars] and the government in general. ”

The legal action against Zuma by the media arises from this frustration.

The law as it is

The Constitution recognizes the right to privacy, the right to freedom of expression (including freedom of the press) and the freedom to receive or impart information or ideas, and the right of access to any information held by the State.

The Law for the Promotion of Access to Information (EPAI) is the instrument that provides access, but prohibits the disclosure of tax information. This is reinforced by the Tax Administration Law (TAA).

The PAIA has a ‘public interest override’, which will allow confidential information, but not taxpayer information, to be disclosed when the disclosure reveals evidence of a ‘substantial violation or violation of the law’, and the public interest outweighs any harm that is derived from the disclosure.

Arguments presented by the media

The ‘media’ – in the form of Financial Mail, the AmaBhungane Center for Investigative Journalism and journalist Warren Thompson – asked the court to consider the constitutionality of the confidentiality of taxpayer information.

They requested Zuma’s tax records based on allegations made by investigative journalist Jaques Pauw in his book The President’s Keepers, that:

  • Zuma did not comply with taxes while he was president, did not file tax returns or pay any taxes; The improvements to his property in Nkandla were an additional benefit, he received donations from illicit sources and a salary from a security company.
  • Zuma appointed Tom Moyane as Sars commissioner to undermine Sars’ enforcement ability and prevent Sars from prosecuting him for non-payment of taxes.

The plaintiffs argued that the prohibition on disclosing Zuma’s tax information violates his constitutional right to freedom of expression and the freedom to receive and impart information.

Arguments presented by Sars

Sars argued that:

  • The promise of confidentiality promotes tax compliance;
  • The confidentiality of taxpayer information is accepted globally; and
  • South Africa would violate international agreements stipulating the confidentiality of tax information if it discloses Zuma’s tax records.

Judgment

The court determined that:

  • There is no direct or factual evidence that the secrecy provisions oblige taxpayers to disclose their affairs to the Sars.
  • Limitations on access to taxpayer information are not justified.
  • The ‘override of the public interest’ on the limitation of the taxpayer’s confidentiality is justified and competent.
  • If the taxpayer’s information is received under an international instrument, such as a Double Taxation Agreement, a Tax Information Exchange Agreement, and the Agreement for Mutual Administrative Assistance in Tax Matters, Sars may still reject the disclosure of this information.

The court issued an order that the relevant sections of the EPAI and TAA related to the prohibition of disclosure of taxpayer information are unconstitutional and invalid.

The court suspended declarations of nullity for two years “so that Parliament can correct the relevant defects.”

Sars will file Zuma’s tax returns for the years 2010 to 2018 by November 26.

In a Nov. 18 press release, Sars said he was considering his options.


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