On 30 May 2023, South Africa's Constitutional Court delivered judgment in Arena Holdings (Pty) Ltd t/a Financial Mail and Others v The South African Revenue Services and Others. By a 5-4 majority of judges, the Constitutional Court:

  • declared that provisions of the Promotion of Access to Information Act ("PAIA") and Tax Administration Act ("TAA") are unconstitutional 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 two years, during which time PAIA's "public interest override" will apply to taxpayer information collected by SARS; and
  • referred the third applicant's request for access to former President Jacob Zuma's tax returns back to SARS for fresh determination.

Facts

Section 46 of PAIA, the so-called "public interest override", 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".

Importantly, this section does not apply to section 35(1) of the PAIA, which precludes disclosure by SARS of information collected by it for purposes of enforcing tax legislation. As a result, when Mr Warren Thompson (the third applicant and a journalist and employee of Arena Holdings) requested Mr Zuma's tax returns from SARS, the request was refused.

Mr Thompson, together with the two other applicants, thereafter successfully applied in the High Court to challenge the constitutional validity of those provisions of PAIA and the TAA which prohibit disclosure, and to compel SARS to disclose Mr Zuma's tax returns in terms of PAIA's public interest override.

Rights and limitations analysis

Both the majority and minority Constitutional Court judgments (penned by Kollapen J and Mhlantla J, respectively) held that the impugned provisions limited the rights to access of information and freedom of expression, and thus proceeded to assess whether the limitation could be justified in terms of the limitations clause.

Since the dispute concerned a clash between the access to information and expression rights; and the right to privacy of taxpayers, this approach is not without difficulty: first, in the recent New Nation Movement case, the Constitutional Court cast doubt on whether one right can sensibly be said to limit another. There, the Constitutional Court emphasised that the provisions of the Constitution are to be read in harmony. Second, the "less restrictive means" requirement of the limitations analysis is not straightforwardly applicable where a right is "limited" by another. After all, in such a case, less restrictive means in respect of one right will necessarily be more restrictive of the other.

Nonetheless, given the Constitutional Court's approach in the previous Johncom and Chipu cases (in which the right to privacy clashed with the right to freedom of expression and where the Constitutional Court applied the limitations clause), its approach to balancing rights in the Arena case was unsurprising.

The majority's limitations analysis

Kollapen J, for the majority, held that the limitation of the information and expression rights was unjustifiable. PAIA and the TAA contain an absolute prohibition on the public accessing taxpayer information held by SARS on request, and thus fail to strike a suitable balance between the rights to information and expression, on the one hand, and the right to privacy on the other.

Moreover, the PAIA and TAA do so in circumstances where all other otherwise confidential information can be disclosed in terms of the public interest override. By contrast, if applied to taxpayer information held by SARS, the public interest override would allow for a narrow incursion into the right to privacy (since it allows access to person's commercial information which does not form part of their "inner sanctum", and even then only in carefully circumscribed conditions) while reducing the incursion into the rights to access information and expression.

Importantly, Kollapen J also rejected SARS' contention that absolute confidentiality is necessary to ensure that taxpayers make complete and truthful disclosure. He noted that full disclosure is ensured through other means (such as criminal sanction for false disclosure) and that SARS can already disclose taxpayer information to the SAPS, if necessary.

The takeaway of the majority's approach to the limitations clause appears to be three-fold:

  1. Despite the conceptual difficulties described above, when rights conflict, the correct balance to be struck is determined with reference to the limitations clause.
  2. The "rational basis test" which, the Constitutional Court in the Lawrence case held applies in respect of "legislative facts", might be of limited application in the future. In terms of that test, when assessing legislative facts ("the facts of the social sciences, concerned with the causes and effects of social and economic phenomena", which are considered by the legislature when preparing legislation) a court is limited to discerning whether there is a "rational basis" for the judgment of the legislators, rather than an all things considered assessment of whether that judgment is correct. The majority's rejection of SARS' explanation of the rationale of the impugned provisions indicates that the Constitutional Court is now prepared to take a more robust approach to legislative facts.
  3. Finally, any absolute prohibition on the disclosure of information might be subject to constitutional challenge.

Remedy

The majority suspended the declaration of invalidity for a period of two years, and read-in the "public interest override" in the interim period. SARS had argued that such an approach was inappropriate and that no interim order should be granted, given the polycentric considerations relevant to crafting a public interest override applicable to taxpayer information.

Whatever the merit of such an argument, the Constitutional Court is generally reluctant to suspend an order of invalidity without providing interim relief (for example, in the Johncom and Chipu cases), and its order was thus unsurprising. Also unsurprising, and in our respectful view correct, was the decision to refer the request for Mr Zuma's tax records back to SARS for consideration, in the stead of the High Court's order requiring disclosure of those records.

Conclusion

The narrow 5-4 split is indicative of the complexity of the issue that faced the Constitutional Court, which is also reflected by the varying approaches found in different jurisdictions.

For those who fear that the Constitutional Court's order might open the floodgates of disclosure, it bears repetition that the public interest override is an onerous provision, and that disclosure is only mandated when tax records provide 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".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.