SARAWAK has rejected an offer by Petronas for a one-off ex gratia payment of 3% in lieu of paying the 5% sales tax imposed by the state, said Assistant Minister in the Chief Minister’s Department Sharifah Hasidah Sayeed Aman Ghazali.

Speaking to a group of business leaders in Kuching last night, she said the 3% ex gratia cash payment came with a condition that the state drops all its other demands, such as enforcing its Oil and Mining Ordinance (OMO) and 5% state sales tax.

As such, Sarawak rejected the offer outright, she said.

Hasidah, whose ministerial purview included state-federal relations, told the businessmen that Chief Minister Abang Johari Openg rejected the offer in a written response.

He also wrote that Sarawak is firm in imposing its state sales tax on petroleum products exported from the state, “as this is our constitutional right”.

Johari was referring to the federal constitution that provides for the state legislative assembly to approve the Sarawak State Sales Tax Ordinance in pursuant to Article 95B(3).

Hasidah said the chief minister also wrote that Sarawak is prepared to reduce the sales tax rate provided that the state government is compensated by Petronas or the federal government over any shortfall.

Petronas and Putrajaya have proposed a “zero-rated state sales tax”, which Sarawak will not consider, she added.

The petroleum tax, which came into force on January 1, is charged on oil companies operating in Sarawak, including Petronas, which export liquefied natural gas (LNG), crude oil and condensates.

Hasidah said Petronas owed the state government over RM1.2 billion in sales tax for the first six months of the year.

“They refused to pay the amount even after an assessment notice issued by us.”

That failure led to the state government on November 21 to file a suit in the Kuching High Court against Petronas.

“Sarawak had greatly contributed to the success of Petronas. It is time for us to get a little bit of that to benefit the state,” Hasidah, who is also Samariang assemblyman.

She said from 1976 to 2017, the total revenue from Sarawak’s LNG was RM660 billion but only RM33 billion was returned to the state.

On crude oil, she said, in 2017, 3.353 million metric tonnes were exported, bring in a revenue of RM9.4 billion.

Sarawak has contributed 60% to 65% of the country’s gas production and 30% to the country’s oil production from 2005 to 2015, Hasidah said, according to a report by oil and gas consultant Arthur D. Little.

On Prime Minister Dr Mahathir Mohamad’s statement last week that Putrajaya is considering selling stakes in Petronas to states where the company’s oil and gas fields are in – a bid to raise funds for the debt-laden federal government – Hasidah said Sarawak should not be asked to pay for “what is ours”.

She said even if Sarawak agrees and takes a 1% stake, it will cost the state billions. – December 14, 2019.