South African Justice Ministry Calls For Relaxation Of Tax Privacy Law

by Robert Lee, Tax-News.com, London

27 August 2001

The South African Justice Ministry has proposed that certain provisions relating to confidentiality in the Income Tax Act be relaxed. Ministry spokesman, Paul Setsetse, told Business Day: 'People's tax affairs should be made public where it is in the public interest to do so ... there is a need for transparency in certain cases.'

The Ministry's comments follow a recent high-profile news story in the South African media concerning the chairman of the Orlando Pirates soccer club, Irvin Khoza, who is the subject of a tax evasion investigation conducted by the South African Revenue Service (SARS). Officials, who have raided Khoza's home during the investigation, suspect that he could owe as much as Rand 66 million in back taxes.

Currently the secrecy provisions of the Income Tax Act bind SARS to treat the tax affairs of every taxpayer with utmost confidentiality. Setsetse told reporters that once the recently enacted Promotion of Access to Information Act becomes more widely used, 'attention on the confidentiality clause contained in the Income Tax Act would arise [and] ... be scrutinised.'

According to a senior judge who spoke to Business Day, the Ministry is on the right track. The judge, who wished to remain anonymous, said the confidentiality clause within the Income Tax Act could be 'overridden by the Promotion of Access to Information Act [which provided for] mandatory disclosure where it is in the public interest.'

A statement released by SARS last week noted with concern that reports in the media have suggested that SARS has concluded a deal with Mr. Khoza and that the department will not proceed against Khoza for taxes. SARS strenuously denied this but confirmed that it has engaged in discussions with Mr. Khoza's representatives with a view to conducting an investigation into Mr. Khoza's tax affairs on the basis of cooperation, total frankness and full disclosure. Contrary to what has been reported in the media, no agreement has yet been reached in this regard.

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