Odd one out — All oil companies paid up O&G sales tax except Petronas

Sharifah Hasidah Sayeed Aman Ghazali

KUCHING, Oct 3: Foreign oil companies such as Shell, Murphy Oil, Pertamina and others have paid the five per cent State Sales Tax (SST) on petroleum products except Petronas.

Law, State-Federal Relations and Project Monitoring Assistant Minister Sharifah Hasidah Sayeed Aman Ghazali disclosed this in a press statement today.

“The State government is very confident that it is able to sustain investor confidence, whether short- or long-term, in the oil and gas industry in Sarawak.

“This is amply demonstrated by the fact that foreign oil companies operating in Sarawak such as Shell, Murphy Oil, Pertamina etc have paid the SST assessed up to date. Only Petronas has yet to pay,” she observed.

Sharifah Hasidah stated if the federal ministry failed to retain the interest of the investors, the Sarawak government was very confident in getting their full attention.

“With regard to alleged loss of investor confidence in the oil and gas industry in Sarawak due to imposition of SST, it must be pointed out that ‘trade, commerce and industry’ are matters under the federal portfolio (Federal List).

“If the federal government feels it is unable to sustain investor interest and confidence in the oil and gas industry in Sarawak, because industry players, including Petronas, has to pay annually RM3 billon of SST, the federal government should consider seriously allowing the state to regulate fully the industry under its Oil Mining Ordinance and Distribution of Gas Ordinance,” noted Sharifah Hasidah.

She revealed that from 1976 to 2017, the total revenue derived from the production and sale of oil and gas in Sarawak amounted to RM660 billion. Out of the RM660 billion, Sarawak received RM33 billion which is five per cent of the total amount.

Sarawak is thus asking Petronas to pay an additional five per cent of SST on petroleum products amounting to about RM3 billion per year to be paid to Sarawak, in view of the state making such big contributions to the national coffers for the last four decades.

Sharifah Hasidah made these remarks when rebutting Finance Minister Lim Guan Eng’s assertion in an article titled “Why the introduction of the Petroleum Soles Tax in Sarawak may not appeal to everyone” published in the Malaysian Reserve on 30 September, 2019, where the latter pointed out that Sarawak’s insistence of five per cent sales tax on petroleum had affected investors’ confidence.

Meanwhile, in rebutting the same article, Sharifah Hasidah disclosed the article contained “a number of inaccurate statements” relating to Sarawak’s constitutional rights to levy SST on the sale of petroleum products, principally Liquefied Natural Gas, crude oil and condensates.

She said that the State Sales Tax Ordinance 1998 was passed pursuant to Article 95B(3) of the Federal Constitution.

This Article reads: “(3) The Legislature of the State of Sabah or Sarawak may also make laws for imposing sales tax, and any sales tax imposed by State law in the State of Sabah or Sarawak shall be deemed to be amongst the matters enumerated in the State List and not in the Federal List.”

“Therefore, the State Legislature’s constitutional authority to pass laws on SST is not dependent on Article 96 as contended in the Malaysian Reserve.

“This right of the State to pass laws on SST was incorporated into the Federal Constitution pursuant to the recommendation in para 24(1) of Chapter III of the lnter-Governmental Committee (IGC) Report which is an Annexure to the Malaysia Agreement.

“To question the state’s right to levy SST (which is a revenue assigned to the state under Item 7 Part V of the Tenth Schedule of the Federal Constitution) is therefore a disguise to dishonour the Malaysia Agreement and what is expressly provided in the supreme law of the nation as a source of revenue of Sarawak.

“The exercise of a right so clearly enshrined in the Constitution should not be dependent upon the outcome of the current discussions on MA63 (Malaysia Agreement 1963) which should be focussed on matters pertaining to the erosion or reclamation of those rights which Sarawak is legitimately entitled to, under MA63,” according to Sharifah Hasidah.