PUTRAJAYA – Former prime minister Datuk Seri Najib Razak and his son Datuk Mohd Nazifuddin will have to pay owed taxes amounting to RM1.69 billion and RM36.7 million, respectively, after the Federal Court here quashed their appeal today.
The duo’s bid was to get the apex court to throw out the Kuala Lumpur High Court’s decision to award the summary tax judgements to the Inland Revenue Board (IRB) compelling Najib and Nazifuddin to settle the unpaid taxes and penalties.
Najib and his son, in their appeal filed at the Federal Court, claimed that Section 106(3) of the Income Tax Act 1967 usurps judicial power in Articles 5(1), 8(1) and 121 of the Federal Constitution.
Five-person bench led by Court of Appeal president Tan Sri Abang Iskandar Abang Hashim, Federal Court judges Tan Sri P. Nallini, Tan Sri Mohamad Zabidin Mohd Diah, Datuk Mary Lim Thiam Suan, and Datuk Abu Bakar Jais unanimously dismissed the appeal with no order to cost.
Nallini, in delivering the decision on the landmark case, said the court found that Article 8 of the Federal Constitution was not infringed.
She said IRB was levying tax on the father and son, in the same manner it does for all citizens of the nation.
“The appellants (Najib and Nazifuddin) have not been singled out for discriminatory treatment, nor treated in a manner not provided in the Income Tax Act 1967.
“There is no evidential basis on record to support such a contention (and) accordingly, there is no basis for the contention that there has been a contravention of Article 8 of the Federal Constitution.
“The Act has the object of ensuring that taxes are collected efficiently and expeditiously in the interest of the citizens of the nation as a whole.
“Section 106(3) of the Act has a rational relation to the collection of taxes efficiently and expeditiously, in that it serves to ensure for the purpose of enforcing the section, it precludes matters which are deferred to the dispute resolution mode specified in the statute.
“Therefore, it satisfies the aspect of the test for Article 8 of the Federal Constitution too and the constitutional validity test.”
She also said the court, under Section 106 of the Act, is fulfilling the purpose of tax recovery or collection only, and not undertaking a full judicial adjudicatory role.
Nallini said the full adjudicatory power is deferred to the appeal, arising from the decision of the SCIT (special commissioner of income tax) by way of questions of law, administrative or constitutional judicial review at a subsequent stage.
“The power of constitutional review contained in Article 4(1) of the Federal Constitution is a formidable instrument and should be wielded by the judiciary with great care.
“If it were to be used indiscriminately or where there is no substantive basis for its invocation, the results could cause considerable damage.
“In the instant appeals, it could stultify the tax collection system of the nation as validly provided for and adversely affect the functioning of the government and the people.”
Najib and Nazifuddin were represented by lawyers Tan Sri Muhammad Shafee Abdullah and Muhammad Farhan Shafee while senior revenue counsel Hazlina Hussain and revenue counsel Norhisham Ahmad appeared for IRB.
The high court, in July 2020, allowed the IRB’s application for a summary judgement to be entered against Najib and his son, to recover the RM1.69 billion and RM37.6 million in tax arrears for the period between 2011 and 2017.
The IRB also issued a bankruptcy notice on February 4, 2021 against Najib and his son following their failure to pay up. The Court of Appeal on September 9, 2021, dismissed their bid to quash the high court’s decision. – October 16, 2023