Sarawak government expects to generate RM3.897 billion through petroleum products sales tax this year
KUCHING: The Sarawak government has imposed the five per cent sales tax on petroleum products starting Jan 1.
The tax, levied on crude oil, natural gas, liquefied natural gas, chemical-based fertilisers and gas-to-liquid products, will generate RM3.897 billion this year and this new source of revenue would be utilised to propel Sarawak’s development agenda.
Sources familiar with the issue, told The Borneo Post yesterday that talks are ongoing with the Economic Affairs Ministry and Petroleum Nasional Bhd (Petronas) on the implementation of payment mechanism to the state.
The issue was discussed during the first steering committee to review the Malaysia Agreement 1963 (MA63) chaired by Prime Minister Tun Dr Mahathir Mohammad on Dec 17 last year.
It is learned that the federal government had tried to appeal to the Sarawak government to reconsider the sales taxes implementation in the interim but the state government had insisted that the sales taxes is part of Sarawak rights as enshrined in the Federal Constitution.
According to part 5 of the tenth schedule in the Federal Constitution, additional sources of revenue assigned to the state of Sabah and Sarawak include import duty and excise duty on petroleum products.
With the amendments to the Oil Mining Ordinance 1958 (OMO) and ensuing regulatory framework on July 10 2018 passed at State Legislative Meeting, Petronas was regulated by OMO and required to conform to the Sarawak Land Code.
The occupation and use of land in Sarawak by Petronas and its contractors for the exploration, prospecting and mining of petroleum has to be regularised to conform to the provisions of sections 36(2) and 209(1) of the Sarawak Land Code.
The amendment empowers State Minerals Management Authority (SMMA) to grant exploration or prospecting licences and mining leases for exploration, prospecting and mining of petroleum (including natural gas).
While this move would grant the state more autonomy over its petroleum resources, critics argued that the enforcement of OMO and the sales tax would have a negative impact on Petronas as the additional tax would lead to more expensive products compared to other oil-producing countries.
The national oil company brought the Sarawak government to court in June last year over the state claim to regulatory authority in the upstream oil and gas (O&G) sector citing that the Petroleum Development Act 1974 (PDA) is the only law applicable for the nation’s petroleum industry.
In the court application, Petronas also sought a confirmation that it is the exclusive owner of petroleum resources in the country as well as the only regulator of upstream activities nationwide, including in Sarawak.
The Chief Minister Datuk Patinggi Abang Johari Tun Openg will be chairing the first Consultative Committee on MA63 today. Members in the Committee include state government ministers and state assemblymen from Gabungan Parti Sarawak (GPS) and two members representing Pakatan Harapan (PH) namely See Chee How (Batu Lintang assemblyman) and Irene Chang (Bukit Assek assemblywoman).