One week before Budget 2022 is to be unveiled, the country’s top taxman has abruptly left his job.
After a week of speculation, the Inland Revenue Board (IRB) announced the departure of its CEO Datuk Seri Sabin Samitah. According to the statement, his deputy Datuk Mohd Nizom Sairi took over effective Oct 19, which is just 10 days before Budget 2022 is to be tabled in parliament.
Sabin was appointed in December 2016 during the administration of former prime minister Datuk Seri Najib Razak. Ironically, his contract comes to an end at a time when the IRB is in the midst of battling a highly contentious tax case against Najib amounting to RM1.7 billion.
It has been reported that Sabin had decided to leave his position at IRB ahead of the expiry of his contract and that his departure was by mutual consent. Whether it was mutual or not is a question that only Sabin will have the answer to.
Nevertheless, Sabin is no small fry in the feared world of income tax.
Being the top taxman in the country, he should have been in the thick of things during the unveiling of the Budget. If he had wanted to leave, he should have done so a few months before the Budget announcement, or well after it had been tabled and passed in parliament.
His departure has been the subject of much speculation. Why leave suddenly, especially so close to the unveiling of Budget 2022? And was there a political dimension to this development?
The speculation arises as Sabin’s departure comes on the cusp of a development that could cement IRB’s position as a powerful entity to question politicians and their source of funding.
The thrust of IRB’s suit against Najib pertains to undeclared income of about RM4 billion that he had received between 2011 and 2017. Included in the amount is the infamous US$681 million (RM2.6 billion) that went into Najib’s account a month before the May 2013 General Election.
This sum of RM4 billion is over and above whatever income Najib had declared and paid taxes for while being the prime minister and minister of finance.
Najib contends that the undeclared sums, including the RM2.6 billion, were donations for his political and corporate social activities and are not subject to tax. He contends that the RM2.6 billion came from the Saudi Arabian government and that he had returned it.
Investigators, including the Department of Justice (DoJ) of the US, allege that the money came from the beleaguered 1Malaysia Development Bhd (1MDB).
The tax case is being closely watched because the repercussions are severe and swift for aspiring politicians. The tax laws are designed to prevent any form of stalling in the payment of dues. If the taxes are not paid, there would be penalties and, ultimately, IRB would institute bankruptcy proceedings, which would prevent anyone guilty of an offence from standing for elections.
Once the IRB issues a notice of assessment, there is little room for negotiations. The rule of thumb is to “pay first and talk later”. The only exemption to this rule is if there are “special circumstances” involved.
But the courts rarely give in to pleas of “special circumstances” because its definition is wide.
Until the Federal Court’s decision last Thursday, Najib’s tax case had been viewed as a major problem for the former prime minister, if at all he had aspirations to make a comeback into mainstream politics.
In July last year, the IRB had obtained a summary judgment against both Najib and his son, Datuk Mohd Nazifuddin, on overdue taxes. The IRB started bankruptcy proceedings against Najib in February this year, and in April, a similar action was taken against Nazifuddin for not making the payment.
The amount that IRB is claiming from Nazifuddin is RM37.6 million.
In the latest development, both Najib and Nazifuddin managed to get a reprieve from the Federal Court from making a payment. The judges ruled that there were “special circumstances” that warrant a stay of execution on the summary judgment.
Najib is appealing against the summary judgment and is also taking his case to the Special Commissioners of Income Tax (SCIT), alleging that the tax assessment was wrong.
On top of that, Najib lodged a police report early last month alleging that his tax matter was investigated three times in 2018 and he had been told that there was no case for additional tax payments. He claimed that high-ranking officers in IRB, together with politicians, were using false documents to pursue the tax charges against him.
The IRB initiated the action in March 2019 when the government was under Pakatan Harapan rule. It sent a notice of assessment to Najib for taxes owed from 2011 to 2017.
It marked one of the rare occasions when the tax laws were used to distinguish political donations from income that is subject to tax. In other countries such as India, tax laws are used as a tool to weed out black money and reduce corruption. It is common for politicians to come under the scrutiny of the taxman.
But it is hardly used here.
Sabin took over as chief executive of IRB in December 2016 and during his tenure, direct tax collection was always on the rise, except for last year when it declined.
According to federal government revenue estimates that were issued in November last year, the direct taxes for 2021 are expected to be about RM132 billion, which is almost at the same level as in the pre-pandemic period.
But Sabin was reported to have said that the IRB was looking to collect almost RM144 billion in direct taxes this year. When Budget 2022 is unveiled at the end of this month, we will know whether the target was achieved.
Notwithstanding Sabin’s performance as CEO of IRB, his abrupt departure warrants an explanation.
M Shanmugam is a contributing editor at The Edge