PUTRAJAYA: A political donation received by Datuk Seri Najib Razak has been “erroneously” treated as additional income and taxed, resulting in a RM1.69bil tax arrears imposed on the former prime minister, the Court of Appeal heard.
The former prime minister’s lawyer Tan Sri Muhammad Shafee Abdullah said the assessment was based on a Saudi Arabia donation that Najib had received and utilised during the general elections.
What was not used was then returned to the donor after the general elections ended, Muhammad Shafee said.
He added that the donation should have been tax exempt yet Najib was imposed with the additional tax assessment after having already paid his income tax.
“We have raised this since the beginning but they (the Inland Revenue Board-LHDN) never responded to our queries on how they computed this (the additional tax assessment),” Muhammad Shafee said.
He was submitting in a hearing of an appeal by Najib and his son Datuk Mohd Nazifuddin to stay bankruptcy proceedings over their failure to settle tax arrears amounting to billions of ringgit.
The LHDN has initiated bankruptcy proceedings against Najib and Mohd Nazifuddin in its attempt to recover tax arrears of RM1.69bil from Najib and RM37.6mil from Mohd Nazifuddin for the period between 2011 and 2017.
Muhammad Shafee urged the court to grant Najib and Mohd Nazifuddin a stay of the bankruptcy proceedings pending a hearing at the Special Commissioner of Income Tax (SCIT) for them to be able to dispute the tax assessment.
Najib and Mohd Nazifuddin are disputing the tax assessment in two SCIT proceedings scheduled for September and October, respectively.
“If he (Najib) is declared bankrupt, he will have problems engaging counsel and he has to make payment through other sources,” Muhammad Shafee said.
He said the amount was “oppressive” on Najib and not granting him a stay would be a breach of natural justice.
Meanwhile, LHDN senior revenue counsel Norhisham Ahmad said while the amount imposed on Najib was undeniably high, it was not a valid reason for Najib to obtain a stay on the bankruptcy proceedings.
He said a high amount did not equate to special circumstances warranting a stay.
“It is in the law that he has to pay first and dispute later,” he said.
Justice Dr Alwi Abdul Wahab, who chaired a three-judge panel yesterday, fixed Sept 4 for the decision.
“We need to go through the submissions,” Justice Alwi said.
Other judges on the panel are Justices Dr Shahnaz Sulaiman and Ong Chee Kwan.
Najib and Mohd Nazifuddin are appealing against a High Court’s decision dated Nov 17, 2025 that dismissed their application to stay the said bankruptcy proceedings against them.
On Oct 16, 2023, the Federal Court ruled that the father and son must pay the arrears after dismissing their appeal to set aside the High Court’s decision.
