How a court finding involving Jacob Zuma may change our tax laws for the better

By Rob Rose

26 May 2024

Getting access to the former president’s tax records will turn unwarranted secrecy on its head.

It was early 2019 when Warren Thompson, a journalist working at the Financial Mail, first hit upon the idea of tilting at a long-standing tax principle that had evolved into widely accepted economic dogma.

“It was quite a specific time,” says Thompson. “Jacob Zuma had resigned on Valentine’s Day in 2018, and Jacques Pauw had just written The President’s Keepers, which detailed how Zuma had received a whole lot of secret payments from shady individuals. And there was also all this unfinished business about how he’d benefited from the ‘security upgrades’ to his home at Nkandla.”

The one body, Thompson felt, that would be able to confirm whether Zuma had indeed abused the country’s laws to this extent was the South African Revenue Service (Sars).

The only problem was, both the Tax Administration Act and the Promotion of Access to Information Act were pretty clear that all tax information had to remain secret. And unlike other instances, like national security, there was no “public interest override” which allowed the public to demand access to this information.

“I figured that right here is the perfect example of how these access to information laws can be used to confirm, once and for all, whether the head of state had really abused his position,” recalls Thompson, who now works at Finance Uncovered in London.

After all, if you couldn’t argue there was a ‘public interest’ in finding out whether a country’s president is breaking all the tax rules which his own party, the ANC, expects everyone else to follow, when could you?

It was a sentiment shared by Sam Sole, founder of the amaBhungane Centre for Investigative Journalism and so, with the considerable assistance of Dario Milo at Webber Wentzel, and later, advocate Steven Budlender SC, the journalists set out to probe just how inviolable the notion of “tax secrecy” really was.

Given how conservative our courts are, it seemed a long shot. In court, Sars’ advocate, Wim Trengove SC, argued vociferously that our tax system was built on this secrecy. Without it, the agency said, “the expectation that the taxpayer will be candid with Sars diminishes”.

But in November 2021, North Gauteng High Court judge Norman Davis declared that actually it was unconstitutional for the access to information laws not to have a “public interest override” in tax matters. As a result, if the public interest case could be made sufficiently, the media houses ought to be given access to Zuma’s tax records.

“There is no direct or factual evidence that taxpayers in South Africa rather make disclosure of their affairs because of the secrecy provisions as opposed to the coercion of the penalties and sanctions which follow upon nondisclosure,” Davis said.

Critics lambasted that ruling. Such an opening would be “dangerous, dangerous” and “pernicious” in the wrong hands, Professor Balthazar wrote on Daily Maverick at the time. Many others felt the same, expecting the conservative elements of the Constitutional Court to overturn Davis’s finding.

Instead, the opposite happened. In May 2023, the Constitutional Court (by a narrow five-to-four margin) upheld Davis’s ruling, effectively sweeping aside a blanket rule which had dominated the tax landscape for decades.

Justice Jody Kollapen said in his ruling that such an “absolute prohibition” could not be said to be “reasonable and justifiable in an open and democratic society”.

It was vital, Kollapen said, not to “elevate taxpayer confidentially to some sacrosanct place where no exception to enable public access to it is possible.
The upshot, the Constitutional Court decided, was that Sars must release tax information if doing so “would reveal evidence of… a substantial contravention of, or failure to comply with the law” and the “public interest in the disclosure of the record clearly outweighs the harm”. It said the Financial Mail and amaBhungane must submit a new PAIA request to Sars, which would then have to consider this case “afresh” in light of the court’s ruling.

Records ‘can’t be found’

It was a ground-shifting victory and in October 2023, the media houses duly sent a new request to Sars for Zuma’s tax records, asking for new documents too that would reveal how the agency dealt with Zuma’s tax affairs.

On 1 December, Sars’s deputy information officer, Siyabonga Nkabinde, wrote back to the media houses, bluntly rejecting the request.

Zuma’s tax records, Nkabinde said, “do not reveal evidence of a substantial contravention of, or failure to comply with the law”, so even under this new Constitutional Court dispensation, it wasn’t obliged to release them.

And yet, intriguingly, Sars said that when it came to Zuma’s links with Royal Security – Roy Moodley’s company which Pauw said had paid Zuma a monthly retainer – these records either “cannot be found and/or did not exist”.

And, on other tax records, Sars said it couldn’t release them as doing so could “reasonably be expected to impede criminal prosecution or result in the miscarriage of justice in the criminal proceedings” against Zuma in the Pietermaritzburg High Court, relating to the arms deal corruption.

It’s a disturbing admission, leaving open the question of whether there is indeed evidence of criminal behaviour in Zuma’s tax records which it won’t reveal in light of the arms deal trial.

So, is this the end of the matter, at least until Zuma’s criminal trial with Thales kicks off, and his tax documents may be unsealed?

Well, no – the publications have now approached the Information Regulator, a body set up three years ago to hear appeals for decisions like this, to force Sars’s hand.

If the Information Regulator finds in favour of Sars, the media will appeal to the high court; if it finds against Sars, the agency could launch just such an appeal.

“We expect that the Information Regulator will make a decision this year,” says DJ Van Wyk, a lawyer from Webber Wentzel handling the case for the media companies. So, does this mean the records may still be released this year? “It’s possible that this happens, but it seems unlikely.”
In the worst case, Van Wyk says, Sars may appeal this all the way back to the Constitutional Court, putting the case back under the noses of the same judges who first made that landmark decision, only years later.

Journalists ‘fishing for evidence’

It’s clear that Edward Kieswetter, the Sars commissioner, has no intention of releasing anything more than he has to. Asked about the case this week by Daily Maverick, he stuck to his guns on the principle of taxpayer secrecy. “Our response to any request has significant implications for all taxpayers,” he said.

Kieswetter argues that the Constitutional Court judgment doesn’t simply set aside the confidentiality provisions, but rather puts in place a high threshold to meet for anyone wanting someone’s taxpayer records. In other words, the court said Sars must consider very specific factors when it gets a request – whether disclosure shows someone had broken the law, whether it shows an imminent risk to public safety, and that the public interest should “clearly outweigh the harm”.

Read more in Daily Maverick: SA Revenue Service blocks access to Zuma’s tax records, again

He was even more blunt in an interview with Business Times’s Chris Barron in March. “The fact is, the [journalists] are fishing for evidence, and one of the ponds they are fishing in is the Sars pond. I can’t allow fishing expeditions for any reason, even under the guise of public interest,” he said. Kieswetter said he didn’t care if it rings alarm bells that someone like Zuma, who was named a “person of interest” by the Zondo State Capture Commission, refuses to consent to his tax records being released. “I’m not here to fuel your thesis, or the thesis of the media, or even my own thesis,” he said.

And yet, legally, the consensus seems to have shifted after the Constitutional Court ruling in favour of transparency.

Aslam Moosajee, ENSafrica’s dispute resolution expert, says that while there may be specific instances where an argument for taxpayer secrecy is warranted, a public interest override is entirely justifiable where someone is a public figure.

“Our constitutional principles of transparency and accountability are clear, and I don’t think a blanket secrecy provision accords with that,” he tells the Daily Maverick. “This is especially so in a country struggling with corruption and service delivery, where people want our politicians to be held accountable.”

It’s vital, however, to counter the misconceptions about this legal change. In particular, the original court case was distorted by critics to make it seem like an attempt to “make everyone’s tax information public”. It’s nothing like that, says Dario Milo, a partner at Webber Wentzel which has poured a vast amount of time and energy into acting for the media houses in this case pro bono, recognising the value of this particular case to society.

Milo agreed with the general principle that taxpayer details remain secret, and this is a line that “shouldn’t easily be crossed” – except in very specific circumstances, like where there’s a “substantial contravention of the law”.

“This bogeyman that has been put out by critics – that suddenly tax information will be splashed all over the internet – that, I’m afraid, has been exaggerated and doesn’t accord with the judgment at all,” he said.

Milo points out that most other categories of information – even legally privileged and national security information – can be accessed under our access to information laws, if there is a public interest involved.
“Why is tax information immune from the public interest override in circumstances where all these other categories of information are not?” he asks.

But is South Africa ready for it?

Hennie van Vuuren, executive director of Open Secrets, argues that there’s a strong argument to be made for the top leadership of all political parties to routinely open their tax affairs to public scrutiny.

“The very powerful ought to be required to provide a high degree of transparency, since they’re potentially lobbyists for vested interests. They’ve chosen higher office, so we should have full disclosure of their interests, and while we do have sight of their property assets, we do need to know about their income,” he says.

Van Vuuren doesn’t say as much, but you can imagine this scenario in a practical sense: if a political party such as Julius Malema’s EFF, say, is lobbying for tobacco interests, it would be useful for the public to have a line of sight into whether any of his income or assets have been funded by these interests.

Read more in Daily Maverick: Party to the Plunder? ANC’s dodgy donations

Comprehensive publication of tax returns is a nice idea, and routine in countries like Norway, Finland and Sweden. But is South Africa ready for that sort of radical transparency?

“I think you could say the very conservative people who run our financial institutions aren’t ready for that,” says Van Vuuren.

He cites the case where Open Secrets and the SA Heritage Archive had to drag the SA Reserve Bank to court to get records detailing financial corruption during the apartheid era. In 2020, the Supreme Court of Appeal granted the request – but the records provided no more detail than that which was already in the public domain.

“What does that tell us? It tells us that they’re not even protecting apartheid profiteers, but rather that it’s the conservative lawyers calling the shots in our institutions, who have a knee-jerk desire to ensure there’s no precedent for openness,” he says.

If those lawyers were shocked when the first ruling against Zuma was handed down, they’d have been apoplectic when the Constitutional Court confirmed it later.

Zuma has left much unwanted legal precedent strewn across our society, from contempt of court orders, to his battle with former public protector Thuli Madonsela over the extent to which state money was used in his private residence. Finally, here’s one court finding involving Zuma that may actually improve our society.

For Thompson, this is precisely what the PAIA is there for. “When you read the preamble to that Act, it recalls how the apartheid government committed terrible abuses under the veil of secrecy, and pledged a new era in which state information would be released if someone asks for it. You don’t get a clearer test case than this,” he says. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.

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Records ‘can’t be found’

Journalists ‘fishing for evidence’​

But is South Africa ready for it?

Journalists ‘fishing for evidence’