PUTRAJAYA (June 14): Federal Court judge Tan Sri Nallini Pathmanathan on Wednesday (June 14) observed that former prime minister Datuk Seri Najib Razak and his son Datuk Nazifuddin Najib’s appeals against summary judgements compelling Najib to pay RM1.69 billion and Nazifuddin to pay RM37.64 million in tax arrears to the Inland Revenue Board (IRB) would open a “floodgate” of cases by those also disputing the taxes to be paid, which would put the country at a “standstill”.

IRB senior revenue counsel Dr Hazlina Hussain also argued that no exception should be given to the duo and that instalment payments could be arranged if they did not have the full amount at hand.

Nallini, who is part of a five-judge bench hearing the appeal, said the duo's pursuit of a full trial on the amount assessed by the IRB to be in arrears for the period 2011 to 2017 would affect millions of people around the country who pay their taxes as stipulated.

The judge pointed out that it would open a “floodgate” of cases where taxpayers would oppose paying their taxes, and that this would be detrimental to the country given that tax revenue is of the utmost importance to people such as the B40.

“The country relies on taxes to run. There are many poor people who rely on taxes as a means of income redistribution from the wealthy which is given to the poor. If every taxpayer comes to court to have a full trial on the amount assessed, the country would come to a standstill, the B40 will be wiped out as there would be no money,” Nallini said.

“Have we looked at it (this case) from the viewpoint of the country, instead of looking at it from the viewpoint of the taxpayer who says his rights have been impinged?” she added.  

She said this in response to Najib’s lawyer Tan Sri Muhammad Shafee Abdullah’s submissions before the bench on Section 106(3) of the Income Tax Act 1967, which stipulates that 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.

Shafee argued that Najib has been denied access to justice, as the Act stops him from defending himself from disputing the RM1.69 billion payment as the Act states that the court does not have the power to entertain any plea on the amount of tax sought whether incorrectly assessed or not.

“The court is saying that they will not entertain any defence by a litigant…. If I cannot raise this defence then I am deprived of a fair trial,” he said.

Nallini was part of the five-judge bench led by Court of Appeal (COA) president Tan Sri Abang Iskandar Abang Hashim, who was flanked by Chief Judge of Malaya Datuk Mohamad Zabidin Mohd Diah and judges Datuk Abu Bakar Jais and Datuk Mary Lim Thiam Suan.

IRB's Dr Hazlina insisted that no exception be given to the father and son, noting that if a taxpayer fails to pay the total sum, a scheme of arrangement can be worked out with the IRB to pay in instalments.

She said that it must follow the ruling of the supreme court of Ghana where a litigant must pay at least 30% of his tax assessment before one can file a civil action against the government which she described as “pay first, talk later”.

“If the taxpayer fails to pay, he can come forward to pay instalments, there are provisions and avenues for payment arrangements,” Dr Hazlina said.

She then questioned why Najib needed an exception to the rule. “Once taxes have been paid, a scheme of taxpayers must be given to him. Why should an exception be given to him?

“This is not an issue of whether it affects constitutional supremacy, this is government revenue, it is important to the government that tax must first be paid,” she said.

She also said that if Najib cannot pay his taxes, he can ask for a stay of execution but only under “exceptional circumstances”.

Dr Hazlina said public interest shall be prejudiced if the appeal is allowed.

After hearing arguments from both sides, Abang Iskandar instructed both parties to file their written submissions to the court for consideration and reserved judgement on the matter to a later date.

On July 22, 2020, the High Court entered the summary judgement against Najib and Nazifuddin requiring them to pay the said amounts. The decision was upheld by the COA on Oct 21, 2021, but the appellate court granted a stay of the summary judgement requiring them to pay the arrears pending the appeal at the Federal Court here.

The summary judgement that has been awarded to the IRB in this case is where the court is of the view that the defendants have no triable issues with regard to their defence, and if it were to proceed to a full trial, it would have the effect of delaying a judgement entered on the defendants.

On Sept 9, 2021, a three-member COA bench led by judge Datuk Abdul Karim Abdul Jalil dismissed Najib and Nazifuddin's appeals on the grounds there is no merit in the two appeals and no error in the judgement of the two High Court judges.

The COA bench, which also included judges Datuk Vazeer Alam Mydin Meera and Datuk Supang Lian, was unanimous in the decision and ordered Najib and Nazifuddin to pay RM10,000 costs each.