THE Petronas board is opposed to the prime minister’s proposal for the national oil company to pay what his political allies in Sarawak demand of it in taxes, Reuters reported.

Citing three sources from the company, the report said the Petronas board and management are hoping to persuade Muhyiddin Yassin to drop the deal to pay the Sarawak state nearly RM3 billion in sales tax levied on petroleum products.

Reuters reported that the Petronas chief executive of 37 years, Wan Zulkiflee Wan Ariffin had resigned in protest over the proposed settlement of tax arrears, the case of which was being heard in the courts.

Sarawak is run by GPS, the Sarawak coalition of political parties allied with the Perikatan Nasional federal government. The votes of GPS MPs votes are seen to be vital to the fledgling federal government which is observed to be clinging on to power with a wafer-thin majority in parliament.

“The Petronas board and management are totally against the deal. Management is drawing up fresh representation for the PM in a bid to convince him to see things their way,” said one source.

Another said Petronas executives recently briefed Muhyiddin, telling him the deal was not viable and would set a bad precedent, but he refused to budge.

Petronas this week filed to withdraw a federal court appeal against a court ruling that Sarawak was entitled to be paid sales tax on oil and gas products.

Petronas already pays federal taxes on its products.

Sources close to Petronas said the firm did not want to end the legal fight that its hand was forced by the prime minister.

A US$470 million (RM2 billion) settlement was announced last month, although Sarawak later said it was still pursuing the case, with state officials saying Sarawak was now seeking nearly US$680 million.

Sarawak Chief Minister Abang Johari Openg said on June 12 that the national petroleum company will pay the disputed tax, which the Sarawak Comptroller of Sales Tax has assessed to be at least RM2.8 billion.

The amount does not include interest for late payment and other penalties.

Abang Johari said the federal government has directed Petronas not to pursue the appeal.

“Once the court proceedings are over, they will pay,” the chief minister told a press conference. – June 26, 2020.