KOTA KINABALU, April 29 — Sabah leaders have reiterated that the state’s constitutional claim to its 40 per cent revenue entitlement must not be confused with federal development allocations, stressing that the two are separate and cannot be conflated in ongoing negotiations with Putrajaya.

Deputy chief minister cum Finance Minister Datuk Masidi Manjun said the ongoing 40 per cent revenue discussions must not be confused to federal development funds or treated as part of broader development assistance to the state.

“This is based on constitution and must not be conflated with federal development allocations,” he said

He added that Sabah also maintains its position that the 40 per cent calculation mechanism should include revenue generated from companies operating within the state, even if those companies are headquartered or declared elsewhere.

“We also maintain revenue generated by companies operating in Sabah but declared outside the state, particularly those headquartered in Kuala Lumpur, should be included in the 40 per cent calculation, regardless of where the company is registered or declared,” he said.

He is ostensibly referring to national or multi-national companies in the oil and gas or palm oil industries who have large operations in Sabah but declare their taxes or revenue federally resulting in loss taxes for Sabah.

The 40 per cent claim comes from a provision in the Federal Constitution - Article 112C and Part IV of Article 10 - which declares that two fifths of federal revenue derived from the state needs to be returned.

The provision has not been honoured from 1974 with Sabah receiving only RM26.7 million annually – considered a fraction of what it is owed - for nearly five decades, before revisions in recent years saw increases to RM125 million in 2022, RM300 million in 2023, RM306 million in 2024, and RM600 million currently.

“For the record, the Sabah Government maintains its position that the original formula under Article 112C and Part IV of Article 10 of the Federal Constitution must be implemented in full.

“As such, it is not appropriate to suggest that Sabah’s efforts in this matter have been compromised, as the process must strictly adhere to constitutional provisions. The state government is aware that the current Special Grant is still far below what should be derived under the constitutional formula,” he said.

“Although not all developments are publicly disclosed, this does not mean that the state government has not acted. In reality, every negotiation meeting does not end at discussion alone, but is followed by further action through official correspondence and continuous reaffirmation of the state government’s position, urging immediate action,” he said.

As talks between the two governments continue over the formula of the 40 per cent, Masidi said that the state has asked that has asked for immediate payment of revenue components that are not in dispute, such as income tax and customs tax.

He said the state government is also open to discussions and to further refining constructive solutions on suitable payment options.

When faced with skepticism from several other elected representatives over the continuous delay and perceived hesitation from the federal government, Masidi said : “Don’t worry I’m still confident they will pay up, its just the time line. But we will push,” he said.

“In conclusion, both the state Government and stakeholders remain committed to ensuring that the implementation of Sabah’s 40 per cent entitlement is expedited and fully honoured by the Federal Government,” he said.