KUCHING, May 8 — The state government today described an agreement with the federal government and Petroliam Nasional Berhad (Petronas) over long outstanding issues on the management of oil and gas and the state sales tax on petroleum products as an important milestone.
Chief Minister Datuk Patinggi Abang Johari Openg said the agreement is in line with the Malaysia Agreement 1963 (MA63).
“With the agreement such as this, a more stable business and investment situation will be created to spur the oil and gas industry in the state,” he said in a statement, in response to an agreement reached earlier between the state government and Petronas over the imposition of state sales tax on petroleum products and other related issues.
He said the state government is being practical and wishes to have the confidence of the oil and gas industry players that it wants to have a cordial relationship with them.
“In this connection, the state government is always committed to work with the federal government and Petronas in further negotiations to ensure that all parties can arrive at amicable solutions and agreements in other related issues,” said Abang Johari.
In a joint statement, Sarawak Assistant Minister of Law, State-Federal Relations and Project Monitoring Datuk Sharifah Hasidah Sayeed Aman Ghazali and Petronas chairman Datuk Ahmad Nizam Salleh said legal disputes between the state government and Petronas over the imposition of the 5 per cent state sales tax on petroleum products and other related issues have resolved.
They said Petronas will make full payments to Sarawak for the sales tax of all oil and gas products from the state.
“In this regard, Petronas agreed to withdraw the appeal of the Sarawak High Court’s decision on the application for Judicial Review on March 13, 2020 and the Sarawak state government will also drop all civil litigation against Petronas for the payment of sales tax on petroleum products.
“In addition to the withdrawal of all legal proceedings, Petronas through its subsidiaries, will make a full payment of sales tax imposed by the state government of Sarawak on petroleum products for 2019 amounting to RM2 billion at 5 per cent of the value of the product.
“The state government of Sarawak and Petronas further agree that sales tax on petroleum products provided under the State Sales Tax (Taxable Goods and Rate of Tax) (Amendment) (No. 2) Order, 2018 (“Order 2018”) shall be charged at a lower rate in time based on future negotiations. The Sarawak State Government has also agreed that sales tax will be limited to petroleum products provided under Order 2018,” they said.
Both Sharifah Hasidah and Ahmad Nizam said that Petronas together with the Sarawak state government will continue to develop the oil and gas industry in the state.