Automatic exchange of tax information and the right to privacy: a South African constitutional analysis

Mia, Aisha Bibi
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Broad-based automatic exchanges of information are increasingly viewed as the norm in global tax practice. The mass transmission of large amounts of personal and financial data creates informational risks and implicates the privacy rights of impacted data subjects. This investigation considers the interaction between broad-based automatic exchanges of information –specifically the Common Reporting Standard (CRS) and FATCA– and the right to privacy contained in section 14 of the South African Constitution. To date there has not been any authoritative legal precedent on this area and the available academic literature is also limited. Applying a doctrinal research method and drawing on the approach employed by the Constitutional Court when adjudicating Bill of Rights matters; a synthesis and analysis of various written sources was undertaken. The sources consulted include: legislation, South African case law, international law, treaty instruments, foreign case law, policy papers and academic literature. This study finds that the CRS exchange of taxpayer information is aimed at reducing global tax evasion and is reciprocal in nature. Additionally, the exchanges take place within a robust privacy framework. Accordingly, the CRS is constitutionally valid, with only limited opportunity to further enhance constitutional consonance. Contrastingly, the FATCA data exchanges are de facto unilateral. They cannot therefore be linked to any legitimate objective to improve tax compliance and revenues in South Africa. In this regard the investigation concludes that FATCA fails to pass constitutional muster.
A research report submitted in partial fulfilment of the requirements for the degree of Master of Commerce to the Faculty of Commerce, Law and Management, School of Accountancy, University of the Witwatersrand, Johannesburg, 2021