Putrajaya still trying to make Sarawak drop petroleum tax, says rep

PUTRAJAYA continues to try and persuade Sarawak to give up the 5% sales tax on the state’s petroleum products, said Batu Lintang assemblyman See Chee How.

He said after the last federal-level special cabinet committee meeting to review the Malaysia Agreement 1963 (MA63) and federal constitution last year, Sarawak agreed to listen to Petronas’ opposition to the tax.

The tax, imposed on January 1, is estimated to net the state government some RM4 billion this year, taking a huge chunk out of the national oil company’s earnings.

See, who sits on Sarawak’s bipartisan MA63 consultative committee, as well as the federal-level technical committee tasked with reviewing MA63 and the federal constitution, told The Malaysian Insight that any meeting between the state government and Petronas would be held outside the special committee because the oil firm is not part of ongoing talks on MA63.

Economic Affairs Minister Mohamed Azmin Ali last November said the sales tax would have a negative impact on competitiveness and Petronas’ earnings.

He said Petronas had expressed concerns about the tax, and that he hoped to discuss the issue with Sarawak leaders.

“Any additional taxes and rise in costs will result in (Malaysia’s petroleum) products being less attractive than the same products from other oil-producing countries,” he said after paying a courtesy call on Sarawak Chief Minister Abang Johari Openg in Kuching.

Finance Minister Lim Guan Eng also raised the issue at a meeting of the special committee last December, saying the sales tax was not justified as it could increase costs and lead to investors not wanting to invest in Malaysia’s oil and gas industry.

But, said See, “they (Azmin, Lim and the federal government) had agreed that imposing the sales tax is our right under the constitution”.

The PKR rep said despite this, Sarawak remains willing to hear Petronas out.

He said he is unable to confirm whether talks have been held, only saying: “Azmin is personally attending to the matter.”

On his stance on the issue, he said: “We need the money for development. If we are able to get close to RM4 billion… for the development of rural areas and for infrastructure, I’m all for it. I’m for what is good for Sarawak.”

See added that he hopes Sarawak, Putrajaya and Petronas can reach an amicable solution.

Abang Johari previously told Lim that if the latter feared the sales tax could lead to higher costs in the oil and gas industry, and scare off potential investors, the federal government could consider recalibrating its tax on oil and gas.

He said Putrajaya could reduce its 38% petroleum income tax to 33%, and questioned why Sarawak should be the one to make the sacrifice when the state needed money to boost its development to catch up with the peninsula. 

Source: The Malaysian Insight

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