How does the October 2023 Federal Court ruling support LHDN’s stance?

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The October 2023 Federal Court Ruling Mandates Payment of Tax Assessments Regardless of Pending Appeals

The October 2023 Federal Court ruling significantly bolsters the Inland Revenue Board of Malaysia's (LHDN) position by affirming the "pay first, talk later" principle. This established legal doctrine requires taxpayers to settle their assessed tax liabilities, even when an appeal against the assessment is ongoing. LHDN's legal team, led by senior revenue counsel Norhisham Ahmad, invoked this precedent to counter arguments for a stay in their case against former prime minister Datuk Seri Najib Razak, asserting that the ruling leaves no room for special circumstances to suspend tax recovery actions.
Upholding the "Pay First, Talk Later" Principle

The Federal Court's October 2023 decision explicitly upheld the "pay first, talk later" principle. This principle is a cornerstone of tax administration, ensuring that tax collection processes are not indefinitely stalled by appeals. It means that the obligation to pay the assessed tax is independent of the outcome of any appeal proceedings before the Special Commissioners of Income Tax (SCIT) or other judicial bodies.
Application in Najib Razak's Case

LHDN cited this pivotal Federal Court ruling to contest Najib Razak's request for a stay on the bankruptcy proceedings initiated by the tax authority. Norhisham Ahmad, representing LHDN, argued that the ruling demonstrated a clear legal precedent against granting such stays, as it mandates the settlement of tax assessments irrespective of appeals. This stance was presented to the Court of Appeal to counter the assertion that proceeding with the bankruptcy action would render Najib's tax appeal meaningless.
Implications for Tax Recovery Actions

The ruling provides a strong legal foundation for LHDN and other revenue authorities to pursue tax recovery actions. By affirming that pending appeals do not automatically halt enforcement measures, the Federal Court's decision reinforces the LHDN's ability to recover outstanding tax debts. This was previously echoed in a High Court ruling on November 17 last year, which dismissed similar applications by Najib and his son, Nazifuddin, and affirmed that taxpayers cannot use appeals as a shield against recovery efforts.

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How does the October 2023 Federal Court ruling support LHDN’s stance?

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