The stay order was dismissed by High Court judge Datuk Ahmad Bache. It was because there were no strong grounds or special circumstances to have the stay order. The decision was given through email.
Despite Najib taking reasonable steps to meet IRB officials for discussion, however until now, no efforts were achieved to ensure payments, even in instalments.
(1.1) Did court give Najib stay order?
According to High Court judge, Datuk Ahmad, the stay order was not given because there were tax due which had to be paid regardless of any circumstances in appeal objections. This was explicitly stated under sections 103 and 106 of the Income Tax Act 1967 (ITA).
This decision came after the famous quote, "pay first, talk later." This principle had maintained the test of time till today. If the order was given, it would defeat the main objective of the ITA, that the plaintiff government has power to collect and recover taxes due and payable as revenue to the government within stipulated time.
This was also adopted from the Federal Court's 1980 decision, that despite that famous quote being harsh, it was intended that under the events of tax evasion, sympathy would not be given to tax evaders, but given reservations for innocent taxpayers, paying their taxes within prescribed time.
Moreover, the ITA should be interpreted in accordance with public interest at mind, not based on individual peculiarities or specifics. If order provided, it would also establish a bad precedent as well. Double standard would also be implied if order allowed, which a former Prime Minister was entitled to the order.
He should have reasonably known the the provisions of the ITA, as IRB was under his command and monitor as Minister of Finance, which the sum was startlingly high.
(2.0) Legal Analysis;
Government of Malaysia v MNMN case
Similarly, in the case of Government of Malaysia v MNMN, lawyers representing IRB would be known as Revenue Counsels. The defendant argued that, section 106 of the ITA was unconstitutional for being contrary to article 121 of the Federal Constitution and article 4(1) of the Federal Constitution.
Also, section 91(1) of the ITA which should be dealt by the SCIT, which is under special circumstance which allows stay of proceedings. This was because, the plaintiff did not plead that defendant committed fraud, willful default or negligence by the defendant in their statement of claim, which allows plaintiff to override section 106 of ITA.
However, court was in favour of the Revenue Counsels that section 106 of ITA does not usurp the judicial powers of the court under article 121 and 4(1) of the Federal Constitution. Unconstitutional challenges to the validity of section 106(3) of ITA was also dismissed in Arumugam Pillai v Government of Malaysia, [1975] 2 MLJ 29 (FC).
The massive or colossal financial damages does not cause special circumstances to allow stay of proceeding. Arguments concerning bankruptcy affecting political career was also irrelevant. There is also no proof that, based on mere assumptions, the defendant's original position would be affected. No proof or evidence were given to rebut any damages would incur on defendant.
(2.1) Court's recommendation
Even when his stay order was dismissed, the judge said that "not all hope is lost", as he still has the ability to negotiate with the Malaysian government and make initial payments first, while awaiting for the SCIT appeal to be heard and decided.
This is evident that IRB permits payment scheme where taxpayers could pay by instalments, after agreeing on a win-win situation. The court judge expounded that this is still a good and noble practice, since 90% of income tax cases registered in court in one year was settled through that method, absconding unnecessary trials and spares court's time.
Though, according to Senior Revenue Counsel Norhisham Ahmad, ever since the summary judgement was entered, Najib still has not done anything to discuss the payment. Once a summary judgement was obtained, there was no need to review tax assessment. Once judgement is obtained, execution had to be done.
(3.0) Arguments by Najib's counsels;
Among the reasons given why stay order ought to be given was because, it would be elusive to restore his original position, due to such massive financial hit. It would cause Najib to go bankrupt and lose his Pekan MP seat due to bankruptcy proceedings. Another court action was taken for bankruptcy as well, amount to RM1.74 billion including the RM1.69 billion plus interest.
This is provided under article 48(1)(b) of the Federal Constitution that a person is disqualified form being a member of either House of Parliament if he is an undischarged bankrupt. Though, the court defendant that massive financial hit were not special circumstances to have stay order.
They were just the fear of losing. Though, Najib's counsel also argued that the RM1.69 billion tax assessments were above the statutory limitations period. It was also argued that the calculation of the tax arrears were incorrectly calculated which involved political donations.
Najib's lawyer, Tan Sri Muhammad Shafee Abdullah commented that, his livelihood including his political career, properties are at risk if bankruptcy proceedings were to continue. If bankruptcy proceedings continue, the Pekan Mp would lose his pension, properties auction for the tax arrears to be executed. It would never be reversible.
Added that since his political career in 1976, he is to stand to lose his right to contest in the elections. Once a person becomes bankrupt, we would lose everything in life. Furthermore, the IRB amount of the RM1.69 was gargantuan and not justified, it would gravely affect Najib. There was a faulty calculation.
Stay of order ought to be given, while matters are being resolved momentarily.
(2.0) Who are the IRB?
According to the official website of IRB, they are established under the Inland Revenue Board of Malaysia Act 1995 to have matters in financial and personnel management, as well as to improve the quality and effectiveness of tax administration.
They govern among the following statutes, which are;
(a) Income Tax Act 1967
(b) Petroleum (Income Tax) Act 1967
(c) Real Property Gains Tax Act 1976
(2.1) Is ITA to be read with Bankruptcy Act 1967 (BA)?
In Lim Moon Heng v Government of Malaysia & Anor, [2002] 2 MLJ 499, the findings were that section 38(1)(c) of the BA clearly states that where a bankrupt has not obtained discharge of bankrupt, he cannot leave Malaysia without permission of the official assignee or the court.
Also, section 104(1) of the ITA adds that any person cannot leave Malaysia under the following situations;
(a) all tax payable by him (whether or not due or due and payable);
(b) all sums payable by him under s 103(4), (5), or (5A); and
(c) all debts payable by him under s 107A(2) or 109(2), or 109B(2)
Hence, the difference is that by the obiter dicta by Zakaria Sam JC, BA only applies to a bankrupt not owing IRB, while the ITA is applied when a person fulfills any of the (a) to (c) requirement under section 104(1). Hence, an issuance of a certificate is one of the authorized modes to recover tax as illustrated in the Supreme Court case of Tai Choi Yu v Government of Malaysia & Ors, [1994] 1 MLJ 677.
(3.0) Conclusion
To conclude, there are two legal arguments presented by the Revenue Counsel and Najib's lawyers. We would have to wait until 16th of June to see the development of the appeal and theorize what would be the court's decision and would Najib lose his livelihood or that the IRB would be afforded their justice?
(4.0) References;
Government of Malaysia v MNMN, retrieved from http://phl.hasil.gov.my/pdf/pdfam/GOV_V_MNMN_02032020.pdf
Ida Lim (2021, June) Court refuses to freeze order for Najib to pay RM1.69b taxes, says all taxpayers treated equally. Retrieved from, https://www.malaymail.com/news/malaysia/2021/06/14/court-refuses-to-freeze-order-for-najib-to-pay-rm1.69b-taxes-says-all-taxpa/1982063
Khairiah N. Karim (2021, June) Najib fails to get stay order against IRB's demand for RM1.69 billion in income tax arrears. Retrieved from, https://www.nst.com.my/news/crime-courts/2021/06/698624/najib-fails-get-stay-order-against-irbs-demand-rm169-billion-income
Khairiah N. Karim (2021, June) Najib will lose everything if he is declared bankrupt, says Shafee. Retrieved from, https://www.nst.com.my/news/crime-courts/2021/06/697989/najib-will-lose-everything-if-he-declared-bankrupt-says-shafee
Malaysia Official Portal, Inland Revenue Board of Malaysia: Together We Develop The Nation. Retrieved from, http://www.hasil.gov.my/bt_goindex.php?bt_kump=2&bt_skum=2&bt_posi=1&bt_unit=2&bt_sequ=1&bt_lgv=2
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