January 17, 2025
Petaling Jaya – The tax hunt against high-net-worth politicians continues, with the Inland Revenue Board (IRB) turning its attention to the close relatives of the late Tan Sri Jamaluddin Jagis.
A source familiar with the matter also told StarBiz that Jamaluddin, also known as JJ, is not the only person on the IRB's radar.
It was unclear how many of them were active or retired politicians.
In the case of JJ, he was a former Umno politician whose family was embroiled in a dispute over his RM2.1 billion assets after his death in 2015.
The assets include 20 properties and companies in Malaysia, the United States and Saudi Arabia.
The dispute was settled last July after more than six years in court.
Months after the amicable settlement, StarBiz was informed that an IRB had launched a tax investigation into the family.
According to sources, the IRB sent letters to JJ's widow and four children asking them to declare their assets.
They were also asked to disclose the sources of funding for past asset purchases.
The IRB has not responded to StarBiz's request for confirmation.
Efforts to get a response from the family were also unsuccessful.
JJ, who died in a helicopter crash, had served as a minister under Tun Dr Mahathir Mohamad and Tun Abdullah Ahmad Badawi.
He also served as the Malaysian Ambassador to the United States from 2009 to 2012 under the administration of Datuk Seri Najib Razak.
In the 1990s, JJ's EPE Power Corp Bhd was awarded the Sabah Independent Power Generation Project.
JJ served as the executive chairman of EPE Power until he stepped down on 3 August 2000, a day after he was appointed deputy chairman of Tenaga Nasional Bhd
(TNB).
He was also a beneficiary of the privatization of government assets such as the Royal Malaysian Air Force Maintenance Station and Lembaga Kemajuan Pahang Tenggara Airport in the 1990s.
While it is too early to tell whether the taxation of JJ's next of kin is politically motivated, it is worth noting that the JJ estate court case previously revealed shortfalls in the income taxes JJ paid from 2004 to 2014.
A local daily reported that JJ's daughter Nur Anis said the amount of cash in the inheritance was disproportionate to the taxes previously paid.
S. Saravana Kumar, a tax attorney at Rosli Dahlan Saravana Partnership, explained that the IRB has the authority to conduct “tax audits” and “tax investigations.”
This is to verify the accuracy and honesty of taxpayers' tax returns.
In a tax audit, the IRB may or may not visit the taxpayer's place of business and the IRB will notify the taxpayer concerned two to three weeks before the tax audit.
A tax investigation, on the other hand, is a situation where the IRB conducts an investigation without the need to issue any notice, and this includes the possibility that the IRB may conduct a surprise inspection of the taxpayer's residence or place of business, or both.
“To enable the IRB to conduct audits and investigations, the Income Tax Act, 1967, provides the IRB with the power to collect evidence.
“This power includes subpoenaing taxpayers and their immediate family members for questioning; requesting bank statements and requiring taxpayers to prepare a capital statement in which taxpayers are asked to list all assets they own and explain how they are financed,” Saravana said.
However, Saravana said taxpayers have the right to challenge the IRB through judicial review or appeal to the Special Commissioner of Income Tax if they believe the assessment was “erroneously made”.
“The Tenaga Nasional case is a good example of IRB assessments being quashed, after tax audits were quashed by the High Court and the Court of Appeal, wrongly increasing assessments by billions of ringgit.
The experienced lawyer added: “Courts have also intervened and granted stay orders in tax cases, such as that of Toh Puan Na'imah Abdul Khalid, the recent widow of former Finance Minister Tun Daim Zainuddin. Tax dispute, the Court of Appeal granted her a stay of execution.
In addition to JJ's family, the IRB has spent the past few years pursuing former politicians and their families.
Toh Puan Na'imah was hit with a tax bill of RM313 million for allegedly undeclaring income of more than RM700 million in 2018.
She called the IRB's assessment “unfounded.”
In the case of Datuk Seri Najib Razak and his son Datuk Nazfuddin, back in 2020, two separate high courts allowed the IRB's application to enter summary judgment to recover the money owed by Najib. Taxes of RM1.69 billion and Nazfuddin’s tax arrears of RM37.6 million.
The arrears are for the assessment years 2011 to 2017.
Summary judgment refers to the court ruling on a case through written statements without a full trial and calling of witnesses.
In November last year, the Federal Court rejected their appeal and ruled that Najib and Nazfuddin need to settle their unpaid income tax.
However, it is unclear whether the amount owed has been paid. The IRB has so far remained silent on the matter.
Interestingly, when Najib was the Prime Minister in 2017, the IRB raided three of Dr Mahathir’s sons, namely Tan Sri Mozani Mahathir, Tan Sri Mirzam Mahathir and Datuk Seri Rimukriz Mahathir's office.
Last year, Mukhriz was levied an additional tax of more than RM5 million by the IRB in 2017, 2018 and 2019.
Earlier this month, former Kedah Menteri Besar Mukhriz received court permission to challenge the notice issued by the Inland Revenue Board.
Mukhriz also demanded a statement against Prime Minister Datuk Seri Anwar Ibrahim, accusing him of abusing his power due to his long-running feud with Dr Mahathir.
An experienced investor who spoke to StarBiz said the IRB has the power to investigate and levy additional tax assessments if the board has good reasons.
“However, the power to do so must not be abused.
“If the public believes that the IRB may be abused by the government of the day, then the government’s plan to make Forest City a center for family offices will be affected.
“High-net-worth individuals will be hesitant to set up family offices in Malaysia because they fear they will be unfairly targeted,” the investor said.
