Sarawak bent on imposing sales tax for petroleum, petroleum products

Sulok Tawie
Sarawak Chief Minister Datuk Patinggi Abang Johari Openg (seated, centre) speaking to reporters after chairing the Sarawak Consultative Committee on Malaysia Agreement and Federal Constitution January 3, 2019. — Picture by Sulok Tawie

KUCHING, Jan 3 — Sarawak will stick to its decision to impose a 5 per cent sales tax on petroleum and petroleum products for the export market beginning this year, said Chief Minister Datuk Abang Johari Openg.

He said he made this point very clear at the inaugural meeting of the Special Federal Cabinet Committee to review the Malaysia Agreement 1963 (MA63) and the Federal Constitution on December 15 last year.

Abang Johari said at the meeting, Finance Minister Lim Guan Eng had expressed his view that the state’s sales tax was not justified as it could increase costs and that investors might not want to invest in oil and gas industries in Malaysia.

“My reply to him was that imposing the sales tax is our right under the Federal Constitution. But if it is not competitive for the investors then the federal government can calibrate its tax structure because they also impose petroleum income tax of 38 per cent,” he told reporters after chairing the Sarawak MA63 Consultative Committee meeting here.

The chief minister suggested at the special cabinet committee meeting for the federal government to reduce the 38 per cent to 33 per cent by deducting 5 per cent of the petroleum income tax.

“Why should we sacrifice ourselves when it is our right to impose the sales tax?” he asked, adding that Lim just kept quiet on his answer on why Sarawak must impose the sales tax.

Abang Johari said the consultative committee agreed with the stand taken by the state government to impose the sales tax.

He said Prime Minister Tun Dr Mahathir Mohamad, who chaired the special cabinet committee meeting, agreed with a proposal by Economic Affairs Minister Datuk Seri Azmin Ali for Petroliam Nasional Berhad (Petronas) to continue to negotiate with Sarawak on issues relating to upstream and downstream activities in the oil and gas industry.

He said with the return of the Oil Mining Ordinance 1958 this year, Sarawak wants to participate in the upstream and downstream activities based on a joint sharing formula with Petronas.

“However, Petronas is rather cautious with our formula which we feel will benefit Sarawak,” he said, adding that the joint sharing formula is more about commercial transactions, and nothing to do with MA63 or the Federal Constitution.

The chief minister also told reporters that the special cabinet committee did not object to Sarawak’s demands not to review its autonomy over immigration, rights to enforce state laws in accordance with the Federal Constitution, protection of its state boundary and sovereignty over sea policy, underground and products within its territorial boundary.

He said these items are non-negotiable and should not be questioned at the special cabinet committee.

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