KUALA LUMPUR (Feb 18): Chief Justice Tun Tengku Maimun Tuan Mat said the judiciary should proceed with restraint in economic and fiscal matters, such as tax measures, unless they are "shockingly arbitrary" or "clearly illegal".
Citing Datuk Seri Najib Razak’s challenge over the imposition of a RM1.69 billion tax charge by the Inland Revenue Board (LHDN), the chief justice said the challenge involving constitutional right hinges on the former prime minister bringing up the matter with the Special Commissioner of Income Tax (SCIT)
The courts' powers, she said, remain circumscribed by the principle of judicial deference, not just to executive policy but foremost to legislative policy.
Speaking at the launch of a book on tax law on Tuesday, Tengku Maimum said: “In economic and fiscal matters such as tax measures, the court should proceed warily or with restraint as the judiciary is not [an] expert in these matters. The state should therefore generally be left with wide latitude in designing and implementing modes of imposing fiscal regulatory measures and the court should not, unless compelled by the Federal Constitution, encroach into this field.
“However, where such measures are shockingly arbitrary, clearly illegal or unconstitutional, the court should act under Article 4(1) of the Federal Constitution,” she said, referring to the Federal Court's decision in the Najib case.
In this regard, she said the courts have consistently upheld the principle where a matter should be raised before the SCIT whether by way of appeal or otherwise, the matter must be raised before the SCIT first, and not the courts via judicial review.
“The courts have no business in engaging in specialised assessments or determination of matters that are uniquely tax matters,” she said, citing the Malayan Banking Bhd (KL:MAYBANK) case where the Federal Court refused to grant leave (permission) to appeal against the Court of Appeal's decision affirming the position that the taxpayer had not exhausted local remedies on challenging a tax matter with the SCIT before initiating a judicial review.
In the tax case involving Najib and his son Datuk Nazifuddin Najib, the apex court in October 2023 upheld a summary judgement entered on them, requiring them to pay the sum demanded by the LHDN first before raising the dispute through the SCIT in line with the practice worldwide on tax matters.
Court may decide on interpretation on application of the law
Tengku Maimun, however, said where an issue concerned the interpretation and application of the law, then it is uniquely a matter for the courts to decide.
“In this regard, the courts have consistently advocated and allowed for the mechanism of judicial review. The courts remain the last bastion of justice that protects the public from legal injustice.
“This does not mean that the courts are in any way interfering with taxation — a matter in which the courts can have no say. Instead, the role of an independent judiciary is to ensure that the law and legal process, as complex as they are, remain paramount and that their compliance is always maintained.
“The judicial process is not a means to avoid taxation and national fiscal obligations. Rather it is a means to ensure that such legal obligations are carried out fairly and in line with the rule of law. The key factor in this equation is therefore finding a balance between tax law and remedies on the one side, and the judicial role to interpret and enforce the law, on the other,” she emphasised.
Tengku Maimun also reminded that those who want to question the legality of a legislation must be prepared to prove their case at a higher threshold.
“In any constitutional litigation is the concept that legislation is presumed constitutional. Any person seeking to challenge such a law must cross the heavy threshold of proving that the law they challenge is constitutionally invalid.
“In the context of tax or fiscal legislation, the height of the threshold is even more glaringly apparent given the huge effect such legislation has on the public purse and the resultant effect it has on the funding of the nation and its institutions,” she added.
The chief justice said the role of the judiciary in tax law is to ensure that laws and legal processes are followed fairly, maintaining the balance between tax law enforcement and judicial oversight.
Tengku Maimun was speaking at the launch of the book Malaysian Tax Law & Principles, co-authored by Datuk DP Naban, S Saravana Kumar and Nur Amira Ahmad Azhar, all lawyers from the firm Rosli Dahlan Saravana Partnership (RDS).
Also in attendance were RDS consultant Datuk Seri Mohd Hishamudin Yunus, who is also Suhakam chairman; Federal Court judges Datuk Abu Bakar Jais and Datuk Vazeer Alam Mydin Meera; and Court of Appeal and High Court judges.