Employers can block the employee in the airport due to tax?

It's the tax office that is linked to the immigration database.

I see. So it is LHDN, not the employer, that blocks the person? If yes, is there anyway to know if you are blocked from leaving Malaysia?

No. But its very shortsighted not to do tax clearance because if a future application is made for an employment pass, old tax issues will need to be cleared up before any action is taken.

Actually the reason why I ask is because I need to go back to my home country first to settle some things first. And then I will go back to Malaysia to clear my tax. I will be staying for a month in my country, so I'm not sure if LHDN had already informed the Malaysian immigration to block my exit. I can try the exit but it will cost me an airfare ticket in case I'm already blocked. Another thing is, it's quite embarassing if people in the airport will see me being escorted by the officers.

Another question, is tax should be cleared first before Employment Pass can be cancelled? Or can it be done simultaneously?

The shortening of the EP is done giving a future date and proof of flight ticket.

The tax clearance is done immediately on resignation so exit date/flight is known and company can produce "leavers certificate" for LHDN process.

The company needs to shorten the EP before you leave employment.

Don't forget you would need a No Objection Letter/Certificate from current company to get another EP processed. So keeping matters tidy helps the situation. A company can block future EPs by not agreeing to giving a NOC (and not cancelling EP)

What if the employee had resigned then went outside Malaysia without settling tax clearance. Then he went back to Malaysia after a month. What is the exit date that should be written on the leavers certificate or CP21 form? Is it the date a month ago?

Last day of paid employment. Most employers require employees to work their notice period as per contract of employment.* But some might allow unpaid leave instead of working notice period.

*Companies have commitments to fulfil and need to replace leaving staff.

When you write your resignation letter you can explain your preferences and they can respond. The NOC is their formal acceptance of your resignation

It's important to agree your leaving arrangements so that the employer does not blacklist you if you leave for a month without their approval.

But tax clearance takes about 10 days after you go to LHDN to make the application. Shortening of EP takes about the same time.

Can Tax clearance and Employment Pass cancellation be done simulataneously? Or should I wait for the tax clearance before I cancel my Employment Pass.

you need your passport on the day you go and do tax clearance. Employer needs to make the leaver's certificate before clearance can take place. So probably tax first then immigration but company may have internal procedures.