SARAWAK Chief Minister Abang Johari Openg believes Putrajaya has accepted that the state’s imposition of a 5% sales tax on all exported petroleum products from January 1 is non-negotiable.

Abang Johari said during a meeting with Sarawak government leaders in Putrajaya last month, Economic Affairs Minister Mohamed Azmin Ali shared his concerns that the sales tax might drive potential investors away due to the increase in cost of doing business.

However, he told reporters today that the reasoning was not valid, as Putrajaya could lower its taxes on the oil and gas industry to make it more competitive.

“My reply was that it is not only the state’s right to impose the sales tax under the federal constitution, but if it is not competitive as Azmin claimed, then the federal government should re-calibrate the tax structure (for the oil and gas industry),” Abang Johari said after briefing the 14-member state consultative committee on what transpired in last month’s meeting.

He said Putrajaya imposes a high income tax of 38% on the petroleum industry, and it could reduce that tax by 5%.

“Why should Sarawak make the sacrifice to be competitive?”

Abang Johari said under Article 95C and the Tenth Schedule of the federal constitution, Sarawak had the right to impose the tax and there was no cap on the amount.

“We can even impose 10%, but we also consider the economic environment, (so) we just impose 5%.

“What they can do is reduce the 38% (petroleum income tax) by 5%. 33% is enough.”

Finance Minister Lim Guan Eng, who is also a member of the steering committee, had earlier said the sales tax – unanimously passed by state assembly in November – was “unreasonable”. – January 3, 2019.