We never thought we’d quote Prince Harry here (we’re more Team Charlie), but this week the ginger one made a good point in highlighting the difference between “public interest” and what the public might be interested in.
We saw this same issue debated across the ocean, when on 30 May 2023, the Constitutional Court of South Africa passed judgment on a case involving the Financial Mail, other independent media houses, and the South African Revenue Service (SARS). The matter raised critical questions regarding the balance between tax administration and the right to a taxpayer’s privacy (in this case, South Africa’s infamous former president Jacob Zuma) and, in our view, sheds light on the critical need for transparency to trump the right to privacy in a healthy and well-functioning democracy.
The issue which the court was called upon to determine originated from the constitutional validity of certain provisions of the Tax Administration Act (TAA) and the Promotion of Access to Information Act (PAIA). Essentially, the TAA read with PAIA, affords SARS the powers to withhold certain taxpayer information, provided that its disclosure is unreasonable or amounts to a breach of a duty of confidence.
The TAA further provides that confidential tax records may only be accessed in limited circumstances (i.e. by court order) and within the context of public interest, which against this backdrop, was precisely what the Financial Mail and other independent media houses (the Applicants) argued – the right to privacy may be limited in a justifiable manner if such a request to access a taxpayer’s records would ostensibly disclose certain forms of malfeasance on the part of the relevant taxpayer that, for example, held a crucial position such as former president of the country.
In a five to four split decision, the court ruled that sections 35 and 46 of PAIA and sections 67 and 69 of the TAA were unconstitutional as these sections were found to prevent access to tax records by a requestor other than the taxpayer, even when the requirements set out in section 46 of PAIA were met.
The effect of this judgment now requires Parliament to amend these provisions to address the constitutional invalidity found therein and further ordered that SARS reconsider the Applicants’ request to access the said records within 30 days of delivery of the judgement.
It was reiterated by various news articles already that taxpayers should bear in mind that this case does not necessarily open the door for any taxpayer’s records to be publicised, unless such disclosure uncovers evidence of a significant violation or non-compliance with the law or, alternatively, if there is an immediate and substantial risk to public safety or the environment.
Nevertheless, the case certainly solidifies in some way the prevailing and much needed consensus in South Africa that criminality must and can be rooted out for the good of our democracy; however, given the history of the strategy Mr Zuma adopted in his various litigation matters, only time will tell when, if at all, those tax records will in fact see the light of day.
Abolishment Of Auditor Firm Rotation
The next day, in a separate, but equally interesting case with nothing to do with the Ginger Nut, the Supreme Court of Appeal resolved the dispute between the East Rand Member District of Chartered Accountants (ERMDOCA) and the Independent Regulatory Board for Auditors (IRBA) which concerned the halting of the implementation of a rule requiring audit firms to rotate their clients after a fixed period; now commonly referred to as the Mandatory Audit Firm Rotation Rule (MAFR).
IRBA is a statutory body established under the Auditing Professions Act (APA), which regulates audits performed by auditors, sets standards of competence expected of the profession, and provides disciplinary procedures for misconduct or breaches of professional conduct by auditors.
The MAFR, introduced by the IRBA on 5 June 2017, seeks to fortify auditor independence and increase audit quality by limiting the tenure of audit firms serving as appointed auditors of public interest entities or listed companies.
In respect of the merits of the matter, the court held that IRBA’s power to promulgate the MAFR was, essentially, ultra vires the APA and stood to be set aside. The reasoning behind this ruling was that the MAFR, which imposed broad restrictions on companies and audit firms in appointing auditors, did not fall within the scope of IRBA’s power to prescribe standards of competence and ethics or auditing standards as provided by the APA.
Although one may argue that a dichotomy exists between these two judgments surrounding the aim of ultimately reaching transparency, of which the aim of the MAFR was to ensure auditor independence, one must not lose sight that, notwithstanding that this judgment has significant implications for the regulation of auditors and audit firms in South Africa, it certainly highlights the importance of statutory interpretation in determining the scope of regulatory powers.
If either of these topics could impact you, or you’d like to understand more, contact us today.
About the author
Today’s article was written Jaco Jansen van Vurren. Jaco is a tax consultant at the Corporate and International Tax team based in South Africa and can be contacted via email at email@example.com