No lawsuit, but Petronas must pay what is owed to Sabah

by AZREEN HANI/ graphic by MZUKRI

SABAH state government is not planning to file a lawsuit against Petroliam Nasional Bhd (Petronas), but the company should pay what is owed to the state, says Chief Minister Datuk Seri Mohd Shafie Apdal.

Mohd Shafie told The Malaysian Reserve in a recent interview that Petronas should have afforded Sabah the same treatment as Sarawak, based on the court ruling.

The Kuching High Court ruled on March 13 this year that Sabah and Sarawak have the right under the Federal Constitution to impose sales tax on petroleum products.

Mohd Shafie says Sabah is embarking on an agriculture blueprint – pic by HUSSEIN SHAHARUDDIN

“It doesn’t matter because the court has decided and I already wrote a letter to Petronas. What is due in 5% tax must be done. Seven companies have already started paying to the state government,” Mohd Shafie said.

“Petronas has yet to subscribe, but I wrote a letter to them because there’s a court decision. If Sarawak is getting it, why is Sabah not getting it?

“We are pursuing it, but I am not going to take it to court, let’s settle it outside the court. It’s not good for the country anyway,” he added.

The Sabah Sales Tax Order (Tax Rate) 2018 was gazetted on Dec 6, 2018, imposing a 5% tax on petroleum products.

Mohd Shafie said Sabah’s Finance Ministry, through a letter dated April 1, 2020, had informed nine companies that are the beneficial owners of the production sharing contracts of the tax implementation.

The companies are Petronas Carigali Sdn Bhd, Petronas Floating LNG 1 (L) Ltd, Sabah Shell Petroleum Co Ltd, Shell Energy Asia Ltd; Hibiscus Petroleum Bhd, Respol Oil & Gas Malaysia Ltd; PTTEP Sabah Oil Ltd, PT Pertamina Malaysia Eksplorasi Produksi; and ConocoPhilips Sabah Ltd.

Mohd Shafie said the state expected to collect the tax before or on May 28 this year. So far, he said seven companies have already paid for a tax collection of almost RM25 million.

Sabah should be collecting some RM50 million per month in revenue in sales tax from oil and petroleum products.

Mohd Shafie conceded that the change of federal government has affected some of the discussions with the state government, but Sabah remains open towards good working relationships.

“Yes, it’s affecting us. Because I remember when we were discussing some of whatever is due (to us), we were not called in. Only Sarawak was…

“Prime Minister (Tan Sri Muhyiddin Yassin) remains a friend, although not in politics. I am more interested in maintaining government to government relations.”

As for Sabah’s economic plan, Mohd Shafie said the state is embarking on an agriculture blueprint to reduce its heavy reliance on the tourism sector.

“With Covid-19, I think we must realise that food security is essential. Singapore, Japan and Hong Kong do not have enough land — but they need food.

“Sabah has an abundance of land and it’s very fertile. That’s an advantage for our country, not only food security for Malaysia, but also the region and the world. I’m sure there are advantages.”

According to Mohd Shafie, it is time for the federal government to reshift focus on East Malaysia — Sabah and Sarawak — to improve trade competitiveness.

“Sabah and Sarawak are big states, rich in resources and nearer to Japan, China. If we are to develop and use these states as leverage to compete with India, Singapore and other parts of the world, trading cost can be halved.

“We are geographically in a better position.”

Mohd Shafie held talks with Mizuho Bank Ltd recently as the state wants access to international banks that are based in Malaysia.

“They’re here in Kuala Lumpur. They indicated to me that ‘if Sabah govt is willing to borrow money from us’, they can lend that. It’s quite cheap, local ones can be quite expensive, (but) we are still looking into it — in terms of rate exchange and such.”