THE Federal Court today was told that the action by Najib Razak and his son Nazifuddin to appeal against the summary judgments obtained by the Inland Revenue Board (IRB) to recover more than RM1.7 billion in tax arrears, was to evade paying the tax.

Revenue solicitor head Hazlina Hussain, who is representing IRB, said generally the taxation scheme of every tax administration in the world demands that taxpayers pay the tax due and payable regardless of any appeal.

“If this appeal is allowed by the court, public interest shall be prejudiced as a whole and this appeal is filed by the appellants to evade the tax that is due and payable in the first place,” she said during the hearing of Najib Razak and his son Nazifuddin’s appeals against the summary judgments entered against them before a panel of five judges led by Court of Appeal President Abang Iskandar Abang Hashim.

The other judges are Chief Judge of Malaya Mohamad Zabidin Mohd Diah and Federal Court judges Nallini Pathmanathan, Mary Lim Thiam Suan and Abu Bakar Jais.

Hazlina said the scheme of taxation that a taxpayer must pay first does not prejudice or discriminate against the taxpayer as any taxpayer aggrieved by the Inland Revenue director-general’s assessment can appeal to the Special Commissioners of Income Tax (SCIT), which is set out by the Income Tax Act (ITA) 1967.  

“The taxpayers must pay the amount due first regardless of any appeal. The rationale behind this principle is to treat taxpayers equally, vis-a-vis, between compliant and non-compliant taxpayers, and most importantly, to protect the government’s coffers,” she said.

Counsel Muhammad Shafee Abdullah, representing Najib and Nazifuddin, submitted that it was clear the respondent is seeking to bankrupt the appellants even before SCIT can hear the merits of the defence to the additional tax assessments raised against his clients.

“If the respondent succeeds in bankrupting the appellants even before SCIT can proceed or conclude, this would mean that the respondent’s entire argument of SCIT being the ‘proper forum’ is academic,” he said, adding that this case was not one that is suitable for summary judgment as there is a reason why it should proceed to trial.

He said this court is cloaked with the jurisdiction to hear and determine the constitutional challenge arising from section 106(3) of ITA, which states that in relation to IRB civil action to recover taxes, the court shall not entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased.

At this point, Nallini interjected, saying that such provisions are essential to Malaysia’s ability to collect taxes as part of the government’s efforts to redistribute wealth among the people.

The judge said the country still needs to collect tax and the government’s ability to collect taxes may be jeopardised if every taxpayer is allowed to present their statement of defence during the tax suit.

“If every taxpayer can come to court and have a full trial (against the IRB’s tax suits and with no summary judgment allowed) on the amount assessed, the country would come to a standstill. The B40 would be wiped out as there would be no money (in the government’s coffers),” Nallini said.

After the parties submitted, the court reserved judgment on the appeals.

The former prime minister and his son are appealing against the High Courts’ decision to allow IRB’s application to enter summary judgments over the income tax arrears.

A summary judgment is obtained when the court decides on a case, through written submissions, without a full trial and calling witnesses.

Two separate High Courts had allowed IRB’s applications to enter summary judgments to recover tax arrears of RM1.69 billion from Najib and RM37.6 million from Nazifuddin for the period between 2011 and 2017.

Both Najib and Nazifuddin lost their appeals in the Court of Appeal in September 2021 to set aside the summary judgments.

On May 10 last year, the Federal Court granted them leave to pursue their appeals to the apex court. – Bernama, June 14, 2023.