On 25 Nov 2013, PM6 Najib Razak, at the opening of the National Economic Empowerment Conference at the Federal Territory Mosque auditorium, said the definition of patriotism in this country is that the rakyat must discharge their responsibility to the country for the good of the people and the nation and one of the pillars of patriotism is the responsibility to pay tax.
He said that when the ordinary rakyat pays tax, they are helping themselves as the country will have a stronger revenue source to accelerate its development. The people will be happier because it is based on resources that will make progress further.
He even said that if the country does not have enough revenue, it will have to continue to borrow and take loans.
But the day the country cannot repay the loans, its ratings will drop, and the people will suffer.
In late March 2019, Inland Revenue Board (IRB) notified the x PM that he had not declared a taxable income of about RM4 billion for 2011-2017 - including the RM2.6 billion, which IRB considered taxable.
Accordingly, IRB issued a notice claiming a tax of RM1.69 billion against the x PM.
Under section 103 (2) of the Income Tax Act of 1967, upon the service of the Notice of assessment, the tax shall become due and payable.
A debt must be paid by the stated due date, regardless of whether or not the taxpayer files an appeal to the Special Commissioners of Income Tax (SCIT).
An appeal does not "stop the clock", and the taxpayer becomes liable to pay the tax arrears first, and upon successful appeal, he would be refunded whatever excess amount he has paid.
As set out in section 103 of the Income Tax Act, after being served with the Notice of Assessment, the taxpayer has 30 days to pay the amount due lest penalties are imposed.
On 25 Jun 2019, IRB initiated proceedings to recover the tax arrears and penalties from the x PM.
The X PM applied for a stay of the proceedings by IRB but was unsuccessful in his application.
Concurrently, the x PM also filed a Notice of Appeal to the Special Commissioners of Income Tax ("SCIT") against this tax assessment.
The High Court, on 22 Jul 2020, allowed IRB's application for a summary judgment to be entered against the x PM to recover RM1.69 billion in taxes from the latter between 2011 and 2017.
The x PM then filed an appeal at the Court of Appeal against the High Court's decision which was unanimously dismissed on 9 Sept 2021.
Following that, the x PM filed an appeal at the Federal Courts, which on 10 May 2022 granted them leave to pursue their appeals to the Federal Court.
In the ongoing hearing before a panel of 5 judges, the lawyer for the x PM said that the Federal Court nullifying Section 106(3) would not have an adverse effect on the country, as taxpayers and tax authorities during the hearing of a tax suit at the civil courts can call tax experts to determine what the actual amount owed in taxation.
As one of the judges on the bench stated, nullifying Section 106(3) would have drastic consequences for the country.
As the Judge in the High Court wrote in his judgment dismissing the x PM's application, the Federal Court in the case of Arumugam Pillai v Government of Malaysia clearly states that the tax legislation clearly intends that the tax as assessed should first be paid and therefore makes provisions that such part of the tax paid as shall be determined at the final "accounting" to be not due and payable shall be refunded. This provision of "pay first and talk afterwards" may be arguably a harsh one. Still, it is an intentional provision of the legislature, having regard to the incidence of tax evasion.
As the DG of IRB said in Sept 2017, IRB carried out its functions without fear or favour in response to its heavy-handed actions taken against Country Heights Holdings Bhd and its major shareholder, Tan Sri Lee Kim Yew.
Country Heights did not pay its taxes amounting to RM22.7 million owed to the IRB for the 1997 and 1998 assessments, and the issue had been prolonged for over ten years.
Reportedly, IRB used the full force of the law in trying to recover back taxes and tax liabilities accrued by Country Heights Holdings Bhd by seizing fixed deposits held personally by its major shareholder worth RM126 million in a foreign bank as payment of the tax liabilities owed by Country Heights.
Eventually, Country Heights Holdings, in their filing to Bursa Malaysia on 17 Aug 2017, said their major shareholder agreed to allow his fixed deposits seized by the IRB to be used to settle the tax liability of CHSB.
Incidentally, in the case against Country Heights, IRB also filed a winding-up petition against Country Heights Holdings, a company listed on the Main Board of Bursa Malaysia.
And the x PM was the PM, then in 2017, when IRB tried to wind up Country Heights Holding.
And now, the lawyer for the x PM said IRB is trying to bankrupt his client by asking him to pay the arrears before a hearing on the merits of his appeal before the Special Commissioners of Income Tax (SCIT).
And the major shareholder of Country Heights has to pay off the amount owing to IRB to save themselves from being wound up by IRB.
The major shareholder then cried foul over the IRB treatment of him and his company.
Why should the x PM be given any leeway if he can do it?
If the x PM's application succeeds, it would only reinforce the claim by Tan Sri Lee Kim Yew in 2017 that he was a victim of selective prosecution using the IRB by PM6, who ironically is now facing the same issue.
In his speech in 2013, the x PM asked the ordinary rakyat to look at the country's journey, take a moment to imagine the direction of our country's development, a land where traditional villages and small towns are given a facelift with new roads, new schools and universities all of which need revenue to be collected.
Reciprocally, the ordinary rakyat is now asking the x PM to look at the country's journey, take a moment to imagine what the RM1.69 billion would do to the new roads, new schools and universities if he is to pay off the arrears and penalties to IRB.
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