THE government has reaffirmed its position on the enforcement of Section 103 of the Income Tax Act 1967, stressing that the long-standing “pay first, challenge later” principle is neither new nor unjust, but a globally recognised tax enforcement mechanism designed to ensure the efficient collection of national revenue.
Responding to concerns raised in Parliament today by Klang MP Ganabatirau Veraman, MOF said the provision creates an overly stringent tax regime and an imbalance of power between taxpayers and the Inland Revenue Board (IRB), the Ministry of Finance (MOF) said the law has been in force since 1968 and is consistent with international tax administration practices.
The ministry said the principle has been upheld in previous court decisions, including Sun Man Tobacco Co Ltd v Government of Malaysia (1973) and Public Prosecutor v Choo Swee Huat (1963), which recognised the legality of requiring tax payments prior to dispute resolution.
In a release on Monday, MOf said that under Section 103, taxpayers are required to settle tax assessments within the stipulated period regardless of whether an appeal has been filed, although their right to challenge the assessment through legal channels remains intact after payment.
The government acknowledged concerns that taxpayers may perceive the system as punitive, but insisted that mechanisms such as instalment payments, refunds, and interest provisions are in place to ensure fairness where overpayment occurs.
“If this principle is not applied, it would open a loophole for certain parties to exploit the appeal process solely to delay tax payments without valid justification,” the ministry said.
Data provided in Parliament showed that out of 6,122,290 income tax returns filed in 2025, only 606 cases involved appeals, with 148 resolved through the Tax Resolution Department and 458 registered with the Special Commissioners of Income Tax, representing just 0.0098 per cent of total filings.
Based on these figures, the ministry rejected claims that Section 103 disproportionately favours LHDN or exerts undue pressure on taxpayers, arguing that perceptions of systemic imbalance are not supported by actual dispute volumes.
The government added that the provision is not intended to be punitive but is designed to ensure orderly revenue collection to fund national development while maintaining fairness to compliant taxpayers.
At the same time, Putrajaya said it remains committed to continuous improvements in governance and internal review processes to ensure that tax assessments are fair, transparent and do not adversely affect taxpayers’ welfare or government revenue.
On concerns regarding tax assessment notices, the ministry clarified that service by ordinary or registered post is explicitly provided for under the Income Tax Act 1967.
MOF rejected claims that such service lacks strict evidential requirements, stating that for additional, estimated or composite assessments, IRB must still provide proof of posting when seeking summary judgment in court.
The courts, it added, assess such evidence based on the civil standard of proof on a balance of probabilities.
The ministry also stressed that notices are sent to taxpayers’ last known addresses held by IRB, and urged taxpayers to ensure their records are updated to avoid administrative complications. - June 22, 2026
