PUTRAJAYA (Oct 16):  The Federal Court has dismissed appeals by Datuk Seri Najib Razak and Datuk Nazifuddin Najib against summary judgments compelling the former prime minister and his son to pay RM1.69 billion and RM37.64 million in tax arrears to the Inland Revenue Board (IRB).

Reading out the unanimous decision by the apex court's five-judge bench, judge Tan Sri Nallini Pathmanathan said they upheld the Court of Appeal (COA) and High Court's decisions, which ruled that the pair must pay the amounts owed to the government.

She said the duo were not treated unfairly and the judgments compelling them to pay the taxes do not contravene Article 8 of the Federal Constitution, which states that all persons are equal before the law and entitled to the equal protection of the law, and Article 5(1), which states that no person shall be deprived of his life or personal liberty save in accordance with law.

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

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 it 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 was awarded to the IRB in this case follows the court ruling that the defendants have no triable issues with regard to their defence, and if the matter 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 was 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.

The amount owed by the father and son are from the years of assessment 2011 to 2017.

Nallini had dismissed the duo’s contention that Section 106(3) of the Income Tax Act 1967 (ITA) is invalid as it contravenes Article 121 of the Federal Constitution. Article 121 is in relation to the powers of the judiciary in Malaysia.

Section 106 deals with the powers of the IRB to recover tax arrears and penalties from taxpayers. 

She said that the court’s powers under Section 106 of the ITA is to fulfil the purpose of recovery or collection only.

“It is not undertaking a full judicial adjudicatory role,” she said. 

She also said that the “pay first, dispute later” method as examined by the bench from cases in South Africa, Australia, Hong Kong and Ghana shows that it is used across the world. 

She surmised that Section 106(3) ITA is constitutional and cannot be said to encroach upon judicial powers, nor contravene Article 5(1) of the Federal Constitution in terms of the right to a fair trial or access to justice.

As for Article 8(1), Nallini said that Najib and Nazifuddin were not singled out for discriminatory treatment. 

She added that the collection of tax is done is the same manner for all citizens of the nation. 

“The appellants (Najib and son) have not been singled out for discriminatory treatment nor treated in a manner not provided for in the ITA. There is no evidential basis on record to support such a contention.

"Accordingly, there is no basis for the contention that there has been a contravention of article 8 of the Federal Constitution."

She said that the ITA has the interest of the nation and its citizens as a whole in mind by collecting taxes efficiently and expeditiously. 

“Section 106(3) ITA has a rational relation to the collection of taxes efficiently and expeditiously in that it serves to ensure that for the purposes of enforcement section 106(3) ITA precludes matters which are deferred to the dispute resolution mode specified in the statute,” she said. 

The bench then dismissed the appeal with no order as to costs.