State govt lawyer dismisses expert’s view that Sarawak cannot impose sales tax on petroleum products

Fong said the right of either the federal Parliament or the state legislature to impose taxes like state sales tax or federal sales tax does not depend on whether the matter or goods is on the Federal List or State List. — Reuters pic
Fong said the right of either the federal Parliament or the state legislature to impose taxes like state sales tax or federal sales tax does not depend on whether the matter or goods is on the Federal List or State List. — Reuters pic

KUCHING, Oct 9 — State legal counsel Datuk Seri Fong Joo Chong today disagreed with constitutional law expert Professor Shad Saleem Faruqi's views that Sarawak can only impose sales tax on items under the State List in the Federal Constitution.

He said Shad Faruqi articulated what seemed to be Petronas’ argument that the state cannot impose the sales tax on petroleum products which is on the Federal List.

“There should not be any restriction on the imposition of taxes neither by the federal Parliament nor by the state legislature,” Fong said when responding to Shad Faruqi’s arguments that the state government cannot impose sales tax on the export of petroleum products.

“But if there can be any restriction, then the federal tax cannot be imposed on the subject matter under the State List,” he said, stressing that federal tax should not be imposed on dark red meranti, light red meranti and meranti bakau produced from logging licenses issued by the state since forestry comes under the State List.

“The federal government’s imposition of federal sales tax on these items on the State List serves to confirm that sales tax may be levied by the federal government on matters on the State List, and likewise, the state sales tax may be levied on subject matters on the Federal List,” Fong argued.

He said Article 95B(c) of the Federal Constitution clearly envisages that the state sales tax and the federal sales tax could be levied without discrimination on goods of the same type.

However, he said federal sales tax enjoys priority in payment.

“There is, therefore, no restriction stated in Article 95B (c) to say that state sales tax can only be imposed on those goods or services forming the subject matters in List II or List IIA (State List) in the Ninth Schedule of the Federal Constitution,” he said.  

“In the final analysis, what Professor Shad said in Kuching yesterday on Petronas’ argument, is not only against the spirit of the Malaysia Agreement, but also, if he was right in his opinion, then, it will open the floodgates for taxpayers not to pay taxes imposed by the federal laws on the subject matters which are clearly under the State List.

“These include the transfer of land or for taxpayers to challenge in court the imposition of taxes like real property gains tax and stamp duties whenever they transfer or dispose of land,” Fong said.

He said the constitutionality of taxes like real property gains tax and stamp duties, levied upon the authority of the laws, which have to be paid, on transfer of land, could be successfully challenged in court.

“I am sure many Sarawakians would want to take a similar stand like Petronas, not to pay these types of federal taxes which they view as unconstitutional,” he said, adding that the Registar of Lands in Sarawak can be compelled by an order of mandamus from the court, to register instruments of land transfers which have not been paid stamp duty.

Fong said the proper and only logical view must be that  the right of either the federal Parliament or the state legislature to impose taxes like state sales tax or federal sales tax does not depend on whether the matter or goods is on the Federal List or State List.

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