In determining a taxpayer's liability, Revenue (IRBM) may acquire information concerning income, assets, transactions, business arrangements and other financial affairs which would ordinarily remain private.
Table of contents
- Introduction
- The statutory character of taxpayer confidentiality
- The meaning and reach of "Classified Material"
- The person entrusted with confidential information
- Taxpayer confidentiality and institutional confidentiality
- When confidentiality enters the courtroom
- Evidential consequences of Section 138
- Can illegally obtained tax information lose its confidential character?
- The position of the Revenue Officer before the court
- The exceptions and the limits of confidentiality
- Consent and the taxpayer's control over information
- A corresponding regime under the RPGTA
- Tax confidentiality as a limitation on evidential freedom
- The reciprocity underlying tax administration
- Implications for tax practice and litigation
- Conclusion
Introduction
The administration of taxation depends fundamentally upon information.
In determining a taxpayer's liability, the Revenue may necessarily acquire information concerning income, assets, transactions, business arrangements and other financial affairs which would ordinarily remain private. Some of that information is volunteered through returns and correspondence. Much of it is disclosed because the tax legislation requires the taxpayer to do so or because the proper administration and enforcement of the legislation makes disclosure necessary.
The Revenue therefore occupies an unusual position. It possesses extensive statutory powers to obtain information while simultaneously becoming the custodian of information which may be highly confidential to the taxpayer.
The Income Tax Act 1967 ("ITA") recognizes that relationship through s 138, which imposes statutory obligations concerning the treatment of "classified material". A corresponding regime exists under s 47 of the Real Property Gains Tax Act 1976 ("RPGTA").
The conventional understanding of these provisions is that they preserve taxpayer confidentiality. That description, while correct, does not fully capture their legal significance.
The more difficult issue arises when taxpayer information becomes relevant outside the immediate administration of taxation, particularly in judicial proceedings. A document may be relevant to a dispute. It may possess considerable probative value. It may even be capable of materially affecting the outcome of litigation.
Yet relevance does not necessarily determine whether the document can lawfully be produced.
The statutory confidentiality regime therefore gives rise to a more fundamental question: to what extent does the law of taxpayer confidentiality operate as a substantive restriction upon the production and use of tax information before the courts?
That question requires consideration not merely of privacy, but of the relationship between statutory secrecy and the administration of justice.
This article argues that s 138 should be understood in precisely that manner. It does more than impose an administrative duty upon Revenue officers. Through its regulation of classified material, classified persons and permitted disclosure, it creates a statutory boundary around taxpayer information which may continue to operate even when that information becomes relevant to judicial proceedings.
A document may be relevant as evidence without being legally available as evidence.
The statutory character of taxpayer confidentiality
Taxpayer confidentiality does not arise merely from administrative practice.
Section 138(1) of the ITA requires every "classified person" to regard and deal with "classified material" as confidential. The obligation is therefore statutory rather than a matter of internal Revenue policy concerning the treatment of taxpayer information.
If confidentiality were merely administrative, disclosure might conceivably be determined principally by questions of necessity, convenience or institutional discretion. Section 138 places the matter on a different footing. Once information falls within the statutory regime, its treatment must be determined according to the legislation itself.
Section 138 does not simply prohibit a Revenue officer from discussing a taxpayer's affairs. It identifies the material protected by the legislation, identifies the persons subject to the statutory obligation, regulates circumstances in which protected material may be produced or used and provides exceptions through which disclosure may lawfully occur.
The provision therefore creates a statutory ecosystem of confidentiality.
The meaning and reach of "Classified Material"
The concept of "classified material" under s 138(5) is broader than the ordinary understanding of a confidential tax return. The provision states that:
"classified material” means any return or other document made for the purposes of this Act and relating to the income of any person or partnership and any information or other matter or thing which comes to the notice of a classified person in his capacity as such"
It encompasses any return or other document made for the purposes of the ITA relating to the income of a person or partnership, together with information or other matters coming to the notice of a classified person in that capacity.
Tax confidentiality is not therefore confined to the return submitted by the taxpayer. The statutory character of the information may potentially extend to other documents generated or obtained through the administration of the ITA and to information coming to the knowledge of persons operating within the statutory framework.
A document does not escape the confidentiality regime merely because it is described as correspondence rather than a return. Equally, information does not necessarily cease to attract protection merely because it has subsequently been incorporated into another form of communication.
The relevant inquiry concerns the relationship between the information and the administration of the taxing statute.
The corresponding language of s 47 of the RPGTA reflects substantially the same legislative approach in relation to information concerning gains falling within that Act. The source material accordingly treats taxpayer information under the ITA and RPGTA as subject to specific statutory confidentiality regimes. S 47 states that:
"classified material” means any return or other document made for the purposes of this Act and relating to the gains of any person and any information or other matter or thing which comes to the notice of a classified person in his capacity as such"
This suggests a deliberate legislative policy.
Tax confidentiality attaches not simply to a particular document but to a category of information obtained within the statutory relationship between taxpayer and Revenue.
The person entrusted with confidential information
The legislation is equally deliberate in identifying those bound by the confidentiality obligation.
Section 138(5) defines a "classified person" broadly. It includes an official, specified public officers and persons advising or acting for persons who are or may be chargeable to tax, as well as employees of the IRBM.
The corresponding definition under the RPGTA is similarly extensive.
The legislation does not proceed on the assumption that taxpayer information remains exclusively within the hands of one Revenue officer. Tax administration inevitably requires information to move between persons performing different statutory and professional functions.
The law therefore protects confidentiality by regulating the persons through whom the information may pass. Access to taxpayer information does not create ownership over that information. It creates responsibility for its treatment.
That proposition assumes particular importance where an officer or other classified person is subsequently asked to disclose information in proceedings unrelated to the immediate administration of the taxpayer's liability.
Taxpayer confidentiality and institutional confidentiality
There is also an important distinction between confidential information concerning a taxpayer and confidential information concerning the administration of the Revenue itself.
Section 31(1) of the Inland Revenue Board of Malaysia Act 1995 ("IRBM Act") prohibits members, officers, employees, agents and other persons having access to information or documents relating to the affairs of the Board from improperly disclosing such information.
At first sight, there may appear to be considerable overlap between that provision and s 138 of the ITA.
The distinction lies in the subject matter protected.
Section 31 is directed towards information concerning the affairs of the Board. Section 138, by contrast, specifically regulates classified material arising within the administration of income taxation.
The source material takes the position that taxpayer information should therefore be dealt with under the specific secrecy provisions of the ITA or RPGTA rather than the general institutional confidentiality provision contained in the IRBM Act.
That distinction is persuasive as a matter of statutory architecture.
A taxpayer's information does not become information concerning the affairs of the Revenue merely because it happens to be held by the Revenue.
The nature of the information must remain the controlling consideration.
This is particularly important in litigation because identifying the wrong confidentiality provision may lead to an entirely different analysis of whether disclosure is permitted.
When confidentiality enters the courtroom
The real significance of s 138 emerges from subsection (2).
The provision does not merely regulate disclosure between private persons or within the Revenue administration. It expressly provides that classified material shall not be produced or used in court or otherwise, except in the circumstances prescribed by the Act.
The language materially changes the character of the provision.
Taxpayer confidentiality consequently cannot be understood solely as an obligation owed by a Revenue officer to the taxpayer.
It also regulates the legal use of the protected material.
This is where tax confidentiality intersects with evidence law.
Ordinarily, the law of evidence is concerned with matters such as relevance, admissibility, authenticity and the weight to be attributed to evidence. Section 138 introduces an antecedent statutory question.
Before asking whether the document is relevant, one must first determine whether s 138 permits its production or use.The distinction may appear technical, but its consequences are substantial. Relevance concerns the value of evidence. Statutory secrecy concerns the legal availability of that evidence. The former cannot automatically answer the latter.
Evidential consequences of Section 138
The significance of this distinction was considered by the Court of Appeal in Dato' Sri Andrew Kam Tai Yeow v Raub Mining & Development Company Sdn Bhd & Anor and Other Appeals [2022] 8 CLJ 405.
The Court's reasoning is particularly important because it moves the discussion beyond confidentiality as an abstract statutory obligation.
The Court regarded the language of s 138 as clear and unambiguous. The definition of "classified material" and the prohibition against its production or use were to be given effect according to their statutory terms. Significantly, the Court treated the language of s 138(2) as imperative and the resulting prohibition as mandatory.
If material falls within the statutory definition and none of the recognized exceptions applies, the court does not possess an unrestricted discretion simply to admit the documents because they may assist in determining the dispute.
The confidentiality regime thereby assumes an evidential dimension: statutory secrecy can operate as a substantive limitation on admissibility, affecting the legal status of the material itself rather than merely the liability of the person disclosing it.
Can illegally obtained tax information lose its confidential character?
A particularly interesting aspect of the jurisprudence concerns information which has already escaped the statutory chain of confidentiality.
One might argue that once confidential tax material has reached the possession of another person, the secrecy regime has effectively been overtaken by events. The information is already known. The document is already available. The court should therefore determine its admissibility according to ordinary evidential principles.
The Court of Appeal's reasoning rejects that proposition.
The material does not cease to be "classified material" merely because it has been obtained through an unlawful act. The statutory character of the document does not depend upon the legitimacy of the route through which a subsequent possessor acquired it.
There is considerable logic to that conclusion.
If unlawful acquisition were sufficient to extinguish statutory confidentiality, the statutory protection could be defeated through the very act which violated it.
A person who could not lawfully obtain taxpayer documents through ordinary channels might simply obtain them improperly and thereafter argue that the documents were now available for unrestricted evidential use.
That would produce an anomalous result:
The breach of confidentiality would become the means through which confidentiality is defeated.
The better view is that statutory classification follows the material for so long as the legislation continues to characterize it as such. Possession is therefore distinct from legal entitlement to use.
The position of the Revenue Officer before the court
Section 138(3) adds another dimension to the statutory protection.
It addresses whether an official may be required by a court to produce or disclose classified material supplied to him in his official capacity or to identify the person who supplied that material.
This provision is particularly important because it addresses the potential tension between judicial process and tax confidentiality.
The existence of a subpoena, summons or other procedural direction cannot therefore be regarded as automatically resolving the matter. A court may possess the procedural authority to require a witness to attend. That does not necessarily mean the witness is substantively authorised—or capable of being compelled—to disclose every category of information in his possession.
The distinction is between compelling the person and compelling the protected information.
Section 138 regulates the latter.
Accordingly, the ordinary powers of the court and the statutory protection of tax information should not be treated as competing absolutes. Judicial powers operate within the legal framework, including statutory restrictions on the production of particular classes of information.
The exceptions and the limits of confidentiality
None of this means that taxpayer confidentiality is absolute.
Section 138(2) itself identifies circumstances in which classified material may be produced or used. These include use for purposes of the ITA or another tax law, specified proceedings concerning tax offences and production or use supported by the written authority contemplated by the provision.
The exceptions are not peripheral to the confidentiality regime. They form part of its architecture.
The statutory scheme does not leave the competing interests unresolved. It identifies the circumstances in which confidentiality yields to another legally recognised purpose.
That statutory structure should inform interpretation.
Where a statute establishes a general prohibition and expressly identifies exceptions, ordinary litigation convenience should not be treated as an additional route around it.
The question should therefore not be whether disclosure appears reasonable.
It should be whether the proposed disclosure falls within a statutory exception.
Consent and the taxpayer's control over information
The availability of written authority under s 138(2) is particularly significant.
It recognizes that the person whose affairs are reflected in the classified material possesses an important interest in determining whether that information may be disclosed in circumstances falling outside the other statutory exceptions.
Consent therefore performs more than an evidential function.
It operates as a statutory mechanism capable of altering the legal position of material which would otherwise remain protected. This reinforces the taxpayer-centred nature of the confidentiality regime. The Revenue possesses the information because taxation requires it. That possession does not necessarily transform the information into material freely available for unrelated purposes. Where the Act requires written authority before disclosure, that requirement should be treated as substantive rather than ceremonial.
A corresponding regime under the RPGTA
The same underlying policy is visible in s 47 of the RPGTA.
The provision adopts concepts corresponding substantially with those appearing in s 138 of the ITA, including classified material, classified persons, confidentiality and restrictions upon production or disclosure. The similarity matters because it demonstrates that taxpayer secrecy is not an isolated feature of income taxation.
It represents a broader legislative approach to information obtained through the administration of direct taxation.
The applicable statutory provision will depend upon the nature of the tax information concerned, but the underlying philosophy remains consistent:
information obtained through statutory tax administration is not ordinarily available for unrestricted secondary use.
Tax confidentiality as a limitation on evidential freedom
The broader jurisprudential question is whether statutory tax secrecy should be regarded as an interference with the court's truth-seeking function.
There is an obvious tension.
Courts generally benefit from access to relevant and reliable evidence. Excluding probative information may, at first sight, appear inconsistent with the objective of determining disputes according to their true facts.
But that tension is not unique to taxation.
The legal system recognizes circumstances in which other public interests justify restrictions upon otherwise relevant information.
Section 138 reflects a legislative judgment that taxpayer confidentiality warrants a specific statutory regime.The proper question is therefore not whether the court's authority is subordinate to the Revenue.
It plainly is not.
Rather, the court itself is required to administer justice according to law, and the law includes statutory provisions determining whether particular material may be produced or used.
Seen from this perspective, enforcing s 138 does not diminish judicial authority.
It gives effect to it.
The reciprocity underlying tax administration
There is also a broader institutional reason for protecting taxpayer information.
Modern taxation depends heavily upon disclosure.
The State expects taxpayers to reveal information concerning their financial affairs so that the correct amount of tax can be determined. The Revenue is consequently placed in possession of information that taxpayers would not ordinarily make available to the public.
That power carries a corresponding responsibility.
A system which compels extensive financial disclosure but provides inadequate control over the subsequent dissemination of that information risks undermining taxpayer confidence in the administration itself.
Confidentiality should therefore not be regarded as an obstacle to efficient tax administration.
It is one of the conditions supporting it.
There is a reciprocal relationship:
the taxpayer is required to disclose because the law demands transparency towards the Revenue; the Revenue is required to protect because the law does not demand transparency towards everyone else.
That distinction lies at the heart of the statutory scheme.
Implications for tax practice and litigation
The practical significance of the confidentiality regime extends beyond Revenue officers.
Tax litigators, criminal practitioners, commercial litigators and advisers encountering tax documents should be cautious about treating possession as equivalent to entitlement to use.
Three separate concepts must be distinguished: possession, relevance and lawful admissibility.
A litigant may possess a document.
The document may be relevant.
Neither necessarily establishes that the document may lawfully be produced in court.
Where taxpayer information is involved, the statutory character of the material must therefore be considered before ordinary evidential analysis is undertaken. Likewise, the fact that a Revenue officer has been summoned as a witness should not automatically be understood as removing the confidentiality obligation.
The nature of the information, the statutory position of the witness, the purpose for which disclosure is sought and the existence of an applicable exception remain legally relevant.
This is particularly important because confidentiality questions can arise outside conventional tax litigation. Tax documents may become relevant in commercial disputes, criminal proceedings, matrimonial litigation, insolvency proceedings or other contexts in which the underlying controversy has little to do with the assessment of tax.
The statutory protection does not necessarily disappear simply because taxation has ceased to be the principal subject matter of the proceedings.
Conclusion
Taxpayer confidentiality under Malaysian law should not be understood merely as an internal obligation governing how Revenue officers handle information.
Its significance is considerably broader.
Section 138 of the ITA creates a statutory regime governing the information protected, the persons entrusted with that information, the circumstances in which it may be disclosed and, importantly, the circumstances in which classified material may be produced or used before a court.
Section 47 of the RPGTA reflects a corresponding legislative philosophy. Section 31 of the IRBM Act, meanwhile, should be distinguished as protecting information concerning the affairs of the Board rather than replacing the specific confidentiality regimes applicable to taxpayer information. That distinction forms an important part of the statutory analysis in the source material.
The Court of Appeal's treatment of s 138 gives the statutory protection particular force. The mandatory character attributed to the prohibition demonstrates that taxpayer confidentiality can affect not merely the conduct of the person possessing information but the legal availability of the information itself in judicial proceedings.
This produces an important distinction for Malaysian evidence law.
A document can be authentic.
It can be relevant.
It can be probative.
It can already be in the hands of a litigant.
And yet the law may still prohibit its production.
The underlying policy is equally important. The tax system gives the State extensive access to private financial information because effective taxation requires it. The legitimacy of that access is strengthened, rather than weakened, by ensuring that information obtained for taxation remains subject to meaningful controls over its subsequent use.
The relationship is therefore reciprocal.
The power to compel disclosure carries with it a responsibility to preserve confidentiality.
And when taxpayer information subsequently reaches the courtroom, the decisive question is not merely whether the court would benefit from seeing it.
The prior question is whether Parliament has permitted it to be seen.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.