SARAWAK legal counsel J.C. Fong has accused Putrajaya of stalling payment for the 5% sales tax imposed on petroleum products mined or processed in the state.

Although it is Petronas that pays Sarawak the tax, Fong said the national oil company had to wait for orders from the federal government.

“Petronas says they can pay but they are waiting for instructions from their major shareholder.

“They need the federal government to give the ‘OK’ to pay,” Fong told a press conference in Kuching today.

In talks between Sarawak and Petronas, Fong said the oil company had told the state that Putrajaya was concerned that the 5% tax, also called the state sales tax, would affect dividends the national oil firm paid to the federal government.

The state tax would only yield Sarawak an additional RM3 billion annually, whereas in comparison, the federal government revenues are projected to be RM231 billion for the 2019 fiscal year, Fong said, citing a report in business paper The Edge.

“Assuming the federal government gets RM3 billion less, what is that RM3 billion to the federal government?” he asked.

“That amounts to less than 1.5% of federal revenue (from Petronas) for this year.

“In percentage terms, it’s so small, yet some say our claim is unreasonable,” he said.

The contribution, Fong said, dos not even include the profits from the sale of liquefied natural gas (LNG) of more than RM40 billion a year.

Fong said Sarawak had given Petronas three options to solve their problem with Putrajaya, as well as an end-of-October deadline to start paying the state its dues under the 5% tax.

“In fact, they came to see us, asking us not to sue them. They want to solve their problem with Putrajaya first.”

Fong said Petronas officials had discussions with him and the state’s controller of the sales tax, the director of the State Planning Unit (SPU) and officers of the Attorney-General’s Chambers.

Chief Minister Abang Johari Openg had earlier said all the oil companies operating in the state had paid their dues on the tax, except Petronas.

Sarawak imposed the 5% tax in January after introducing it in the 2019 state budget last year.

The state has asserted its right to do so under the federal constitution, although there are differing views by constitutional law experts, as petroleum products appear under the federal list, while states may only impose tax on matters listed in the state list in the constitution. – October 9, 2019.