Petronas-Sarawak govt sales tax accord not ‘formal’ deal, says top state body

Under the May agreement, Petronas had agreed to pay RM2 billion in sales tax owed to Sarawak. (AFP pic)

KUCHING: The Sarawak Consultative Committee on Malaysia Agreement 1963 (MA63) clarified today that the recent joint statement between the state government and Petronas on the state’s rights over oil and gas and sales tax is not a “formal” agreement.

The clarification comes following criticism of the agreement, including that it was a “sellout” of the aspirations of Sarawakians and that it was also not in line with an earlier stand of the state government.

In May, it was reported that according to a joint statement issued by Petronas as well as Assistant Law, State-Federal Relations and Project Monitoring Minister Sharifah Hasidah Sayeed Aman Ghazali, Petronas had agreed to pay RM2 billion in sales tax owed to Sarawak.

This came after reaching a settlement over a dispute on the management of oil and gas extracted from the state.

In return for Petronas’ agreement to settle the payment, Sarawak would gradually decrease the 5% sales tax rate imposed on the oil firm, it added.

In January last year, the Sarawak government imposed a 5% sales tax on Petronas’ petroleum products under the state’s Sales Tax Ordinance 1998.

Petronas, however, refused to pay the tax, saying it was unconstitutional. This resulted in the state government taking legal action against it.

On March 13, the Kuching High Court ruled that Sabah and Sarawak had the right under the Federal Constitution to impose sales tax on petroleum products, dismissing Petronas’ bid to declare the Sarawak state sales tax null and void.

When news of the Petronas-Sarawak government agreement was reported, some groups and individuals criticised it.

Tanjong Batu assemblyman Chiew Chiu Sing, Bukit Assek assemblyman Irene Chang and Batu Lintang assemblyman See Chee How, who are members of the Sarawak Consultative Committee on MA63, had urged the panel’s chairman Mohamad Asfia Awang Nassar to call for a meeting to deliberate on the matter.

They said the arrangement reached between the Sarawak government and Petronas had proceeded without prior notice, deliberation or sanction of the MA63 consultative committee.

“We are most concerned that the agreement reached between the Sarawak government and Petronas will have detrimental and dire financial consequences for the state.

“Any concession made by the state government in their arrangement and agreement may contravene the desires, demands, and expectations of Sarawakians,” they said.

However, Asfia said today the joint statement did not have the “format, framework, hallmark, salient and indispensable features, wordings and phraseologies” of a formal agreement.

“It has no proper title, recital or preamble, no signature, no witnesses’ names, no seals, no witnesses’ seals or signature,” he said at a press conference here.

Instead, he said the joint statement was only an ongoing negotiation between the Sarawak government and Petronas.

He also said assistant ministers in the state had no power to bind the state government.

In fact, Asfia said Petronas had yet to pay the RM2.878 billion sales tax and there would be no deduction or reduction.

‘Sarawak’s oil rights not for sale’

“The oil and gas of Sarawak are for sale but the rights over the oil of Sarawak are not for sale and never will be. Our rights are not negotiable. Our position on sales tax is clear.

“If we are soft in our pursuit of the sales tax, this will flash a wrong signal. Other foreign companies may be emboldened to be recalcitrant in the payment of the sales tax,” he said.

He said negotiations on the state’s rights over oil and gas and sales tax had proven to be protracted, arduous and intractable.

“The situation from before until now did not create a good climate for Sarawak because prime ministers come and go. Successive federal governments have taken a stand where they did not budge an inch to the demands made by Sarawak,” he said.

Therefore, the committee, he said, would be looking into three provinces, namely the Petroleum Development Act 1974, Continental Shelf Act 1966 and the Territorial Sea Act 2012, as these contravened Article 2b of the Federal Constitution.

“If we legitimise them, that’s tantamount to a repudiation of the Oil and Mining Ordinance 1958, the Sales Tax Ordinance 1988 and the Malaysia Agreement 1963 (MA63).”

He said negotiations on the state’s rights over oil and gas and sales tax would be done on a two-track basis.

“The first track can be done by those who walk the corridors of federal power while the second track, which we must emphasise, is from this consultative committee,” he said, adding that the negotiating team from the committee would be led by state Tourism Minister Abdul Karim Rahman Hamzah.

Other members of the negotiating team are deputy speaker Gerawat Gala, Assistant Tourism, Arts and Culture Minister Sebastian Ting, Muara Tuang assemblyman Idris Buang and Batu Lintang assemblyman See Chee How.

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