Sales tax on oil is part of MA63, says Sarawak legal counsel

Sarawak legal counsel JC Fong (left) and Assistant Law, State-Federal Relations and Project Monitoring Minister Sharifah Hasidah Sayeed Aman Ghazali at a press conference today.

KUCHING: The Sarawak government has maintained its stand that the state can impose sales tax on its petroleum products.

Sarawak legal counsel JC Fong said the state government disagreed with constitutional law expert Shad Saleem Faruqi’s statement saying the state cannot impose state sales tax on petroleum products because they come under the federal list.

He said the imposition of sales tax is something that had been agreed upon in the Malaysia Agreement 1963 (MA63) and Sarawak should have the right to do so.

“It’s part of the MA63. You can’t be telling us that we can’t impose tax on our own goods,” he said in a press conference here, today.

Fong said it was clearly expressed in paragraph 24(1) of the Inter-Governmental Committee (IGC) report, which is now an annexure to MA63.

“Besides, we’re talking about an item that is manufactured in Sarawak and exported.

“We’re not talking about liquefied natural gas (LNG) manufactured in the peninsula. We’re talking about the LNG manufactured in Bintulu.”

He said there could be no restriction on the imposition of taxes by the federal or state legislatures.

The “artificial separation” of the state and federal list by Shad Saleem for the imposition of state or federal sales tax is incorrect, he said.

“We also don’t know how Shad Saleem came to know about Petronas’ argument regarding the sales tax. He was not part of the negotiating team,” he said.

Fong said Petronas had never raised this issue with them.

“I can only hope he did not come here as a mouthpiece for Petronas,” he said.

According to Fong, Petronas had informed the state government that they had no issues in paying the sales tax. However, they needed to wait for the federal government to give them the “green light” to pay the sales tax to Sarawak.

He said Petronas had informed the state government that the sales tax would affect their profit and dividend, which they had to give to the federal government.

“In fact, Petronas had come to see us, asking us not to sue them because they wanted to resolve the matter with the federal government,” he said.

Fong said the Sarawak government had given Petronas three options to consider in resolving their problems. However, he refused to disclose what these three options are.

“So, it’s not like what Shad Saleem said,” he reiterated.

He said the Sarawak government did not have any intention to pick a fight with Petronas or the federal government through its decision to impose the 5% sales tax on its petroleum products.

“We are not even asking the federal government for 20% of oil royalty. We just want a fairer share of the oil and gas revenue derived from the production in Sarawak and for Sarawakians to have more opportunities to participate in the oil and gas industry.

“Based on the statistics published in The Edge last week, the federal revenue for this fiscal year is about RM231 billion. So, why can’t the federal government sacrifice RM3 billion for the state’s sales tax?”

The amount is less than 1.5% of the federal revenue for this year, he said.

“We should go back to the ‘grand idea’ of the Shared Prosperity Vision 2030. If the federal government has about RM231 billion; why not give us RM3 billion?”