The Malaysian Insight

SABAH is calculating how much the federal government owes it in special grants and tax returns, said Chief Minister Mohd Shafie Apdal.

He said Putrajaya has defaulted the payment for the 40% revenue rights to Sabah since 1974.   

He told the state assembly that committees have been set up to audit the collection of taxes and duties.

Shafie said a study had to be done to determine how much revenue the federal has collected from Sabah, as most of the collection was done by federal agencies.

“It will take time to know the state’s income from the federal collection and determining the amount claimable by the state.

“Nonetheless, we are taking steps to solve this problem by forming various committees to calculate how much they have collected,” he said during the question time in the Sabah assembly sitting in Kota Kinabalu today.

Shafie was responding to a question by Tambunan assemblyman Jeffrey Kitingan on whether the Warisan-led government had come out with ways to collect the mandatory special grant meant for the state.

Kitingan earlier proposed that the state take over all the collection work and give Putrajaya the 60%, as stated in the constitution.

Unlike the oil royalty, the special grant is stipulated in the federal constitution and therefore mandatory for the federal government to pay the 40% back to Sabah.

Based on records, the federal government has defaulted on the annual payment of revenue entitlement since 1974.

The federal government also failed to carry out a review of the grant entitlement as required by the Malaysia Agreement 1963 and Article 112D in the Federal Constitution.

The reason given by the federal government at the time to refuse to carry out the review and make the right payments was that the “federation is not in the financial position to do a review.”

Shafie said the state also has the option of imposing its own taxes in order to collect revenue.

For example, the Sabah assembly amended the Land Ordinance (Cap 68) to allow the state government to collect taxes on minerals from its seabed and subsoil, and also passed a new amendment to assume territorial rights up to the continental shelf last year. – April 15, 2019.