Bankruptcy would render tax appeal ‘meaningless’, Najib’s lawyer tells court

PUTRAJAYA: Former prime minister Najib Razak risks being declared bankrupt and having his financial affairs placed under the insolvency authority if he fails to obtain a stay of bankruptcy proceedings initiated by the Inland Revenue Board (LHDN), the Court of Appeal heard today.

His lawyer, Shafee Abdullah, told a three-member bench chaired by Justice Alwi Abdul Wahab that allowing the bankruptcy action to proceed would render Najib’s appeal before the Special Commissioners of Income Tax (SCIT) in September “meaningless”.

“It would be akin to entering the boxing ring with both hands tied,” he said.

Shafee said Najib would be barred from carrying out many activities if adjudged bankrupt, while his finances and assets would come under the control of the director-general of insolvency.

He said LHDN had imposed additional tax assessments totalling RM1.69 billion for the 2011 to 2017 assessment years, linked to an alleged RM8 billion donation which Najib maintains was used for political and welfare activities.

The SCIT is scheduled to hear Najib’s appeal over six days from Sept 7.

Representing LHDN, senior revenue counsel Norhisham Ahmad said Najib must first settle the tax debt, citing the Federal Court’s October 2023 ruling upholding the “pay first, talk later” principle, under which tax assessments remain payable despite pending appeals.

“There are no special circumstances to justify a stay,” he submitted.

The bench, which also comprises Justices Shahnaz Sulaiman and Ong Chee Kwan, fixed Sept 4 for its decision.

On Nov 17 last year, the High Court dismissed applications by Najib and his son, Nazifuddin, to stay bankruptcy proceedings over unpaid tax arrears of RM1.69 billion and RM37.6 million respectively, affirming an earlier decision by the deputy registrar.

The High Court also ruled that their pending appeals against the tax assessments did not prevent LHDN from pursuing recovery action.

Najib is challenging two bankruptcy notices arising from additional tax assessments that initially totalled RM1.46 billion but have since risen to RM1.69 billion with penalties and interest. He maintains that the assessments are flawed and should not be enforced while related proceedings are still pending.

On Oct 16, 2023, the Federal Court upheld a summary judgment requiring Najib and Nazifuddin to pay RM1.69 billion and RM37.6 million respectively in unpaid taxes and penalties.