Malaysian Bar Seeks To Assist Federal Court In Najib And Son S Tax Appeals

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The Malaysian Bar seeks to help the Federal Court in its hearing of appeals by former prime minister Najib Abdul Razak and his son Mohd Nazifuddin over tax-related rulings against the duo.
The Bar cites as a reason the potential impact of the apex court’s ruling could have on all taxpayers in Malaysia, especially on the issue of whether courts are compelled by law to disregard taxpayers’ defence against tax-recovery suits by the Inland Revenue Board (IRB).
According to a copy of the Bar’s letter to the secretariat of the chief justice dated yesterday, the lawyer’s group is applying to be amicus curiae (friend of the court), namely one who is not a party in a case who assists the court by providing information, expertise or insight that has bearing on issues in the matter.
Najib and Nazifuddin are appealing against a Court of Appeal dismissal of their appeal to quash High Court summary judgment rulings in the RM1.69 billion and RM37.6 million tax suits against each of them, respectively.
Last year, two separate benches of the High Court in Kuala Lumpur allowed the IRB’s application for summary judgment in the tax suits. In effect, this allowed the lower courts to rule in favour of the IRB in the tax suits against Najib and Nazifuddin, without needing full trial which could have considered the duo’s possible defence.
Relying on the summary judgment rulings, the IRB has since commenced bankruptcy proceedings against Najib and Nazifuddin to recover the tax arrears.
One of the central issues in the appeals is whether Section 106(3) of the Income Tax Act 1967 (ACP) is invalid for contravening Article 121 of the Federal Constitution.


Section 106, in general, empowers the IRB to institute a civil action in court to recover tax arrears and penalties from taxpayers.
Section 106 (3) specifically states that when in relation to IRB’s 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”.
Article 121 is in relation to the powers of the judiciary in Malaysia.
Bar has the responsibility to give its view
In their appeals, Najib and Nazifuddin’s legal team contended that Section 106(3) is unconstitutional as it takes away the court’s power (as per Article 121) to consider the defence of a taxpayer against the IRB’s civil actions to recover the tax.
Through the application letter filed today in the judiciary’s e-filing system, the Bar said that this is the first time that the Federal Court would decide on this issue, which could have a major effect and widespread impact on all taxpayers in the country.
“There has been a sharp increase in the IRB filings of civil actions and summary judgments at every level/stage of courts involving Section 106(3) ACP.
“In cases where summary judgments have been issued against taxpayers, there is the possibility that if taxpayers are unable to pay the taxes and penalties before their (tax reassessment) appeals before the Special Commissioners of Income Tax could be heard (including any appeals on the same), those taxpayers would face the bankruptcy process (if an individual) or insolvency (if the taxpayer is a company).
“Therefore, the Malaysian Bar has a responsibility under Section 42(1) of the LPA (Legal Profession Act) to give its views in line with other cases where the Malaysian Bar has applied to be amicus curiae,” it said.
The Bar explained that its members are lawyers acting for taxpayers in the IRB’s tax-related civil actions and summary judgment bids, and took note of the complications, effects and implications that arise from Section 106(3).
“The Malaysian Bar respectfully and humbly holds the view that it is very important for every single legal issue, factor and submission be fully brought to the Federal Court’s attention, and the Malaysian Bar proposes that a tax counsel, experienced in tax-related cases, represents the Malaysian Bar for this purpose if this ‘amicus curiae’ application is allowed by this honourable court,” it added.  - Mkini

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