Shad (right) answers a question fielded during the question-answer session, as Wong looks on. — Photo by Muhammad Rais Sanusi
KUCHING: The five per cent royalty on oil for Sabah and Sarawak is not derived from the Constitution but from the freely-negotiated Petroleum Development Act, the Petroleum Mining Act and the Assignment Deed between the states and Petronas.
Holder of the Tunku Abdul Rahman Foundation Chair at University of Malaya, Prof Emeritus Datuk Dr Shad Saleem Faruqi pointed out that of special interest was the meagre five per cent oil royalty that these states received.
“The federal government’s answer is that under the Constitution, oil and oil fields are in federal hands.
“Sabah and Sarawak are entitled only to import duty and excise duty on petroleum products,” he said in his talk on ‘The Spirit of the Malaysia Agreement 1963 in Our Constitution’ here yesterday.
Shad explained that Sabah and Sarawak had special sources of revenues to meet their needs above and beyond what other states received.
He shared with all that Sabah and Sarawak were entitled to earnings on eight sources of revenues – import and excise duties on petroleum products; export duty on timber and other forest produce; royalty on minerals; 30 per cent customs revenue on medicine and health products; state sales tax; state ports and harbours; state water supplies; and revenues from licences connected with water supply.
He also noted that there was a serious dispute between Petronas and Sarawak about Sarawak’s constitutional rights to impose a state sales tax on the sale of petroleum products.
“Petroleum products are in the federal list. Therefore, any regulation of or dealing with ‘petroleum products’ is also in federal hands.
“The states should impose sales tax only on items or products in the state list. State sales tax on products taxable under federal law will result in double taxation,” he explained.
Shad added that in relation to petroleum products, the power of the states was limited to issuing permits and licences, and charging for them, but did not extend to imposing sales tax on matters assigned to the federation in the federal list.
Earlier, Chief Justice of Sabah and Sarawak Tan Sri David Wong Dak Wah also delivered a keynote address.
The talk was attended by local lawyers, politicians and members of the public.