THE 5% sales tax Sarawak will impose on all petroleum products produced in the state from January 1 will have a negative impact on competitiveness and Petronas’ earnings, Economic Affairs Minister Azmin Ali said.

Azmin said the national oil company had expressed concerns about the ruling and that he hoped to discuss the issue with state leaders.

“Any additional taxes and rise in costs will result in (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 today.

“It will have an impact. Nevertheless, we respect the decision of the state government.

“I take a proactive stand and hope to discuss this issue further,” said Azmin.

In debating the budget in the assembly, Kota Sentosa assemblyman Chong Chieng Jen had said the tax would have a far reaching effect on consumers in Sarawak as they would have to pay more.

He cited the cost of buying a lottery ticket, which includes a state sales tax, as an example in which punters in the state pay 10 sen more for a ticket than those in the peninsula.

The tax, the deputy minister of domestic trade and consumer affairs said, will affect the supply of liquefied natural gas (LNG) to Japan as the tax will increase the cost of production for petroleum.

It would also affect farmers and the agricultural sector as fertilisers will be expensive due to the additional cost of making urea, a key ingredient in the production of fertilisers.

Abang Johari, in tabling the state’s 2019 budget on Monday, said the state was exercising its right under Schedule 10, Part V(7) of the Federal Constitution to impose the sales tax to generate funds for its record RM10.39 billion budget.

The new sales tax, to be levied on crude oil, natural gas, liquefied natural gas, chemical based fertilisers and gas to liquid products, is expected to raise RM3.897 billion in revenue for the state next year.

Abang Johari said the state chose to impose the sales tax as it “has not much choice but to be self-determining in its development efforts” due to it no longer being able to rely on the federal government for funds.

“In looking at the current reality and assessing the situation objectively, Sarawak, despite 55 years of independence, is still lagging very, very far behind in its development compared with Peninsular Malaysia,” the chief minister had said. – November 7, 2018.