Petronas expected to pay Sabah $408m in sales tax

Petronas had fought Sarawak state's demand for sales tax in court.
Petronas had fought Sarawak state's demand for sales tax in court.PHOTO: REUTERS

KUALA LUMPUR • Petronas, Malaysia's state-owned energy giant, is expected to pay the resource-rich state of Sabah RM1.25 billion (S$408 million) in sales tax next year.

Sabah Deputy Chief Minister Jeffrey Kitingan said Prime Minister Muhyiddin Yassin had agreed for the state to collect the 5 per cent tax from Petronas next year, Bernama news agency reported late on Saturday.

Sabah and neighbouring Sarawak state together hold much of the nation's oil and gas reserves, and have long asked for more payments from Petronas, the sole manager of the country's energy reserves.

Petronas suffered its first loss in nearly five years in the second quarter due to a coronavirus-driven slump in demand and oil prices. The payments could further hurt its finances.

The firm had fought Sarawak's demand for sales tax in court but in September, it paid the state RM2.96 billion in taxes, as part of an unexpected settlement deal.

Analysts said the payment could encourage other states to make similar demands.

Sarawak's Chief Minister Abang Johari Openg is said to be a close political ally of Prime Minister Muhyiddin. Sources have said he is open to giving more oil money to the state.

But former Petronas chief executive Wan Zulkiflee Wan Ariffin had opposed the settlement and resigned in June.

Tan Sri Muhyiddin's agreement for Petronas to pay Sabah comes after his ruling coalition wrestled control of the state from the opposition in a state election in September.

Petronas is a significant source of revenue for the federal government and a hit to its finances could also affect the annual dividend it pays to the government, which is its sole shareholder.

The company is set to pay RM34 billion in dividend this year and RM18 billion next year.

REUTERS

A version of this article appeared in the print edition of The Straits Times on November 09, 2020, with the headline 'Petronas expected to pay Sabah $408m in sales tax'. Print Edition | Subscribe