Two oil and gas companies told to pay tax or stop operations


Sabah Local Government and Housing Minister Datuk Masidi Manjun

KOTA KINABALU (July 19): The Sabah state government will stop and cancel all the work passes for the operations of two oil and gas companies if the fail to pay RM97.31 million accrued State Sales Tax and penalty.

Local Government and Housing Minister Datuk Seri Panglima Masidi Manjun told the State Assembly on Tuesday that this would be enforced on Oct 1, 2022, if the amount claimed was not settled.

On July 8, the Sabah government issued a letter to the companies to inform them of the matter.

Masidi disclosed this when he provided an update on the case involving Repsol Oil & Gas Ltd (Repsol) and SEA Hibiscus Sdn Bhd (SEAH), which refused to pay the State Sales Tax.

In reply to nominated assemblyman Datuk Seri Panglima Yong Teck Lee, who asked about the outcome of the case involving Repsol and SEAH, Masidi said that the Sabah government had issued a letter to them on June 8 (this year) to pay the State Sales Tax, and on June 14, the State government rejected the plea letter sent by the companies.

He said that on June 21, the director of the State Sales Tax gave a notice that the accrued State Sales Tax and penalty of RM97.31 million must be paid within a 30 days period from the issuance date of the letter or civil action will be taken.

On June 22, the affected companies met with Petronas and the Sabah government to discuss the payment whereby the companies requested for a grace period of one week, said Masidi.

He added that on July 1, the Sabah government met with Petronas for subsequent action by the government on the companies following the agreement reached on June 22.

Masidi also informed the House during the question and answer session that the Sabah government has collected RM808 million (73 percent) of the estimated RM1.1 billion in sales tax revenue for petroleum tax for this year.

He said that between April 1, 2020 and June 30, 2022, the State government had already collected RM2.458 billion.

Masidi also informed that two more petroleum products will be subjected to State Sales Tax starting August 1, 2022.

He said that this was part of the State government’s efforts to expand resources and increase state revenue.

“The products are ammonia and urea which are estimated to contribute a total of RM46 million in state revenue this year,” said Masidi in reply to a question by Yong.

Masidi also informed the August House that the State government has begun implementing the State Sales Tax of five percent on petroleum products, namely, petroleum crude oil and natural gas, including liquefied natural gas, on April 1, 2020.

He said that this was stipulated under the 2018 State Sales Tax Order (Rates Taxes).

He explained that in accordance with Section 10(1) of the 1998 State Sales Tax Enactment, every person carrying the business of selling or supplying taxable products is to apply for the State Sales Tax license from the State Sales Tax director.

“To date, a total of 13 oil and gas companies have registered and have been granted a State Sales Tax license,” Masidi said.

He also said that in pursuant to Section 14 of the 1998 State Sales Tax Enactment, the tax licensee must submit a statement of assessment, namely Form 4 together with the tax payment within 28 days from the taxable period.

“For example: for the taxable period for the month of June, Form 4 must be completed and submitted together with the payment before or on the 28th July,” he said.

He also explained that the provisions under the 1998 State Sales Tax Enactment also enables the State government to take actions to claim the unpaid taxes from the taxpaying company.

“Any person who fails to submit a statement of assessment or fails to pay the due amount of state sales tax shall be liable to a fine not exceeding RM50,000 or imprisonment for a term not exceeding three years or to both;
“The director of State Sales Tax may make an assessment at his best discretion of the amount of tax to be paid.

“If an amount of state sales tax is not paid within the prescribed period, a penalty of 10 per cent may be imposed and increased by another 10 per cent for every 30 days of unpaid tax balance up to a maximum penalty of 50 per cent,” he said.

He also warned that the State Sales Tax director may revoke a sales tax license and cited that a company cannot carry on business without a State Sales Tax license.

He also added that the State Sales Tax director may issue a request to the Director General of Immigration to ban any person(s) from leaving Malaysia.

“State Sales Tax and penalties can be recovered as a civil debt payable to the State government,” he explained.

Aside from Yong, Senallang assemblyman, Datuk Seri Panglima Mohd Shafie Apdal also interjected Masidi as he requested an update on opportunities for local Sabahans in the oil and gas industry.

“Where are the participation of (our) oil and gas companies? We have to be firm to ensure the long-term opportunities for the children of Sabah,” said Shafie.

He also queried on the actions taken by the Sabah government to benefit from the oil and gas sector since Sabah is still the country’s poorest state.

In reply to Shafie, Masidi said that one of the contents of the Sabah government’s agreement with Petronas is towards the creation of the SMJ Petroleum which will act as an umbrella to facilitate opportunities to local companies and upscale their capabilities.

“We have a committee that meets once every few months to follow up on updates to ensure more Sabah companies and people of Sabah are involved in the oil and gas industry,” he said.

He also added that since early last year, the State government has made it compulsory for non-Sabahans to apply for work permit to work at oil platforms in Sabah.

“Our policy is to put Sabah first … we will refer to our database and if we have the expertise, we won’t issue the work permit. We have 2,000 capable Sabahans as oil platform workers,” he said.

He added that this has already been implemented and the outcome and support from oil and gas companies has been encouraging.

He also said that upscaling is being done with Petronas.

“If we follow what is promised, in a few years we can be proud that we are finally going in the right direction in the oil and gas (industry).”