Will petroleum sales tax burden Sarawakians?

Response to:

Putrajaya still trying to make Sarawak drop petroleum tax, says rep, Malaysian Insight, posted on our blog 14.2.2019

Batu Lintang assemblyman See Chee How’s comment on the 5% sales tax serves no advantage to any party if an overall consensus is not reached.

The impact of the sales tax would make oil and gas products from Sarawak more expensive. When the competitive edge is lost, in the long term this would negatively impact on revenue. It may seem attractive initially but it would hurt the state’s economy. It is not sustainable.

Although both Sarawak and Petronas have their reasons or opinions about the sales tax, it is important for both the parties to work together and arrive at a ‘win-win’ situation. In this context, a stronger relationship could be established between Petronas and Sarawak’s Petros, which has been given executive powers under the State’s Oil Mining Ordinance.

The Oil Mining (Amendment) Bill 2018 passed by the Sarawak State Assembly in July last year, among others, was to update several provisions in the Oil Mining Ordinance (OMO) and to bring the ordinance in line with current practices and operation in upstream sector of the oil and gas (O&G) industry.

Petronas possesses the capabilities, expertise and exposure. Clearly Sarawak’s Petros can benefit immensely from a collaboration with the NOC. Haggling on the 5% sales tax would only serve to create animosity and detrimental to the state.

Apart from developing the upstream oil and gas sector in Sarawak, Petronas and Petros could also be involved in downstream activities such as the development of a medium scale oil refinery in the sate. The propensity for Petros to generate sustainable income then is high.

By: V.P Christian (Ex- Research Institute Director)

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