Petroleum duties: Govt urged to review compensation payable to Sabah, Sarawak

25 Nov 2021

By Nur Syafiqah Abdullah

KUALA LUMPUR: Democratic Action Party (DAP)’s Kota Kinabalu MP Chan Foong Hin has urged the federal government to increase and review the compensation payable to Sabah and Sarawak for the abolition of import and excise duties on petroleum products in these two states which had stayed stagnant since 1999.

He made the call when participating in the debate in Parliament yesterday during the third reading of the Budget 2022 bill for the Ministry of Finance.

He pointed out that the two states are entitled to impose import excise duties on petroleum products pursuant to Item 1, Part V of the 10th Schedule in the Malaysian Federal Constitution as additional source of revenue assigned to states of Sabah and Sarawak.

“However, since 1999, due to Malaysia’s participation in the ASEAN Free Trade Area (AFTA), the Federal Sales Tax Act of 1972 was amended to abolish import duty and excise duty on all product throughout Malaysia.

“As a result of the same, Sabah and Sarawak had been prohibited from imposing import duty and excise duty on petroleum products, affecting the constitutional rights of Sabah and Sarawak.

“In return, the federal government has to compensate Sabah and Sarawak every year for the loss of this source of revenue. This amount has been fixed at RM240 million in 1999 and is divided equally between the two states as compensation for the abolition of these two duties.

"However, the relevant constitutional provisions have not been revised, and basically this means that Sabah & Sarawak retains its constitutional rights to this additional source of revenue. Moreover, since 1999 for the past 20 years, this amount of compensation of RM240 million has never been reviewed nor increased,” he said.

“Will the amount of compensation be reviewed pursuant to the government’s promise to uphold the Malaysian Agreement 1963?” he added.

In his reply, Finance Minister Datuk Seri Tengku Zafrul Aziz promised that the federal government will look into and review the compensation for the abolishment of import duty and excise duty on petroleum products payable to Sabah and Sarawak.

The minister said that the amount will be discussed and reviewed together with the proposal to return 40 per cent of Sabah’s net income under Article 112D of the Malaysian Federal Constitution to the Sabah government.

On another matter, Chan had also expressed his solidarity with Sepanggar MP Datuk Aziz Jamman, stating that his fellow colleague in parliament did not incite anyone nor commit sedition but merely raised the voices of the people of Sabah.