S'wak maintains right to impose state sales tax on petroleum products, contrary to opinion

  • Nation
  • Wednesday, 09 Oct 2019

KUCHING: Sarawak maintains that it has the right to impose state sales tax on petroleum products, contrary to the opinion of constitutional law expert Professor Emeritus Datuk Shad Saleem Faruqi.

In a lecture on the spirit of the Malaysia Agreement 1963 (MA63) here on Tuesday (Oct 8), Shad Saleem said the state could only impose sales tax on items under the Federal Constitution's state list.

"Petroleum products are in the federal list. Therefore, any regulation or dealing on petroleum products is also in federal hands," he was reported saying.

However, state legal counsel Datuk Seri J.C. Fong said there was no restriction in the Federal Constitution that state sales tax could only be imposed on goods and services on the state list.

"We don't agree with the views of Prof Shad. We say that there cannot be any restriction on the imposition of taxes by federal or state legislatures.

"If there can be a restriction, then federal tax cannot be imposed on subject matters on the state list like the transfer of land.

"If that is the case, we can object to Parliament passing a law imposing real property gains tax and stamp duty for the transfer of land.

"That sort of argument by Prof Shad cannot be sustained legally," he told a press conference here on Wednesday (Oct 9).

Fong added that items such as turtle meat, freshwater fish and meranti wood are subject to federal sales tax although turtles, riverine fishing and forestry are matters on the state list.

"The imposition of federal sales tax on these items on the state list serves to confirm that sales tax may be levied by the federal government on matters in the state list, and likewise state sales tax may be levied on subject matters in the federal list," he said.

This comes as Petronas disputes Sarawak's right to impose state sales tax on petroleum products under Article 95B(3) of the Federal Constitution and Sales Tax Ordinance 1998.

To date, all oil companies operating in Sarawak have paid the 5% sales tax, except Petronas.

Fong said Sarawak was not trying to pick a fight with Petronas or the Federal Government over the sales tax.

"We are not even asking for 20% oil royalty. We are asking for two things.

"One, a fairer share of the oil and gas revenue derived from production in Sarawak. And two, more opportunities for the Sarawak government, Sarawak companies and Sarawakians to participate in the oil and gas industry," he said.

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