Don’t question Sarawak’s right to impose sales tax on petroleum, says assistant law minister

Hasidah said that according to publicly available data, from 1976 to 2017, the total revenue derived from the production and sale of oil and gas within Sarawak territory amounted to RM550 billion, of which only 5 per cent or RM33 billion was paid to the state. — Reuters pic
Hasidah said that according to publicly available data, from 1976 to 2017, the total revenue derived from the production and sale of oil and gas within Sarawak territory amounted to RM550 billion, of which only 5 per cent or RM33 billion was paid to the state. — Reuters pic

KUCHING, Oct 3 — The Sarawak government’s right to impose a 5 per cent sales tax on the export of petroleum and petroleum products should not be questioned by anyone, Assistant Law, State-Federal Relations and Project Monitoring Minister Sharifah Hasidah Sayeed Aman Ghazali said today.

She said Article 95B(3) of the Federal Constitution empowers Sarawak and Sabah to make laws on the imposition of sales tax.

Sharifah said any sales tax imposed by Sarawak and Sabah should be deemed as among the matters enumerated in the State List and not the Federal List.

“Therefore, the Sarawak State Legislature’s constitutional authority to pass laws on SST is not dependent on Article 96 of the Federal Constitution,” she said in a statement in response to an article published in The Malaysian Reserve on September 30.

Hasidah said the Sarawak Sales Tax Ordinance 1998 was passed by the State Legislative Assembly pursuant to Article 95B(3) of the Constitution.

She stressed that Sarawak’s right to pass laws on SST was incorporated into the Federal Constitution pursuant to the recommendation in para 24(1) of Chapter lll of the lnter-Governmental Committee (lGC) Report which is an Annexure to the Malaysia Agreement 1963 (MA63).

“To question the state’s right to levy SST is, therefore, a disguise to dishonour the Malaysia Agreement and what is expressly provided in the supreme law of the nation as a source of revenue of Sarawak,” she said.

Hasidah said the exercise of a right should not be dependent upon the outcome of the current discussions on MA63 that should be focused on matters pertaining to the erosion or reclamation of those rights to which Sarawak is legitimately entitled.

She said that according to publicly available data, from 1976 to 2017, the total revenue derived from the production and sale of oil and gas within Sarawak territory amounted to RM550 billion, of which only 5 per cent or RM33 billion was paid to the state.

“Sarawak has, therefore, contributed very significantly to federal coffers from its rich oil and gas resources since 1976.

“All the natural gas derived from Sarawak were converted to LNG for export to Japan, Korea and Taiwan, earning very significant foreign exchange for the Malaysian government.

“Hence, the imposition of SST on petroleum products is a discharge of the state government’s fiduciary duty to Sarawakians to seek a fairer share of the revenues from oil and gas produced in Sarawak,” she said.

Hasidah said based on the present production rate of oil and gas in Sarawak and at current global oil prices, the amount is RM40 billion annually.

“The SST will yield approximately RM3 billion additional revenues for the state,” she added, saying that there is no basis for Finance Minister Lim Guan Eng, as reported in The Malaysian Reserve, to dismiss the 5 per cent sales tax as unreasonable.

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