Petronas now recognises Sarawak’s right to impose SST, says Sharifah Hasidah

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By withdrawing their appeal, Petronas recognises Sarawak’s Constitutional rights and that they are bound by the state’s laws and decisions of the Court which, prior to this, the corporation refused to acknowledge.

KUCHING: Sarawak government has agreed to a settlement with Petroliam Nasional Berhad (Petronas) on the State Sales Tax (SST) not because the state has a weak case and cannot take its chance in the appellate courts, said the state’s de facto law minister Datuk Sharifah Hasidah Sayeed Aman Ghazali.

Responding to questions raised by Parti Sarawak Bersatu president Dato Sri Wong Soon Koh on the settlement, she said it was reached after Petronas failed in its application to have proceedings to defer or suspend payment of the SST for 2019 until the disposal of its Appeal on June 17, 2020.

“That Petronas has agreed to pay in full the SST due for Year 2019 and to withdraw its Appeal, must be deemed to be its unequivocal acknowledgement or admission of the State’s constitutional right to impose SST on petroleum products and its acceptance of the High Court Judgment which declared the state has such constitutional authority to impose SST,” said Sharifah Hasidah, who is the Assistant Minister of Law, State-Federal Relations and Project Monitoring.

“By withdrawing the Appeal, Petronas agreed to be bound by the decisions of the High Court wherein the High Court decided that Sarawak rights are protected by the Federal Constitution, The Malaysia Agreement 1963 and the Recommendations under Inter Governmental Committee Report 1962,” she said in a statement.

Hasidah stressed that by withdrawing their appeal, Petronas recognised Sarawak’s Constitutional rights, including under the Malaysia Agreement 1963 and the Inter-Governmental Committee Report, and that they are bound by the state’s laws and the decisions of the Court which, prior to this, the corporation refused to acknowledge.

Sharifah Hasidah added that under the terms of the settlement, Petronas would pay in full to the Sarawak government SST due for the year 2019.

She said this amounted to around RM2 billion, excluding statutory late payment penalties and interest accruing on the amount assessed from the date of Notice of Assessment till full settlement.

“The SST for year 2020 remains at five per cent of the sale value of the petroleum products. Only Notices of Assessment for the Q1 2020 have been issued. There is no agreement yet for the reduction of SST for the current Year 2020,” she explained.

She said Wong’s claim that “the anticipated O & G tax for two years (for 2019 and 2020” totalled RM 6.775 billion” was settled for a vastly reduced sum of RM2 billion was completely untrue and misleading.

“The RM2 billion paid by Petronas is only SST for Year 2019 and excluded SST paid by other oil companies like Shell, Murphy Oil, Pertamina, and others operating in the state. The amount of SST to be collected in 2020 have yet to be ascertained.

“Whether there would be a reduction in rate of SST in future years would depend on the outcome of the “commercial settlement” to be reached, to be reached with the resumption of negotiations between the state government, Petros and Petronas,” she said.

She further pointed out that such a commercial settlement would entail greater state participation in the upstream operation (both offshore and onshore), as well as investments in downstream business and industries, so as to enable the state to have a more equitable share of the returns from oil and gas produced within the boundaries of Sarawak.

“The GPS state government remains firmly committed to defend the sovereign rights of Sarawak to the oil and gas resources of the State. It has amply demonstrated this by taking Petronas to court over the SST issues,” said Sharifah Hasidah.

“The state government will resolve all other issues through the ongoing negotiations with the federal government and Petronas. The outcome of these negotiations will ultimately bring in more investments in the oil and gas sectors to sustain the growth of related industries, and enable the state, through Petros, to enhance its involvement in the upstream and downstream areas of the petroleum industry,” she said.