KUALA LUMPUR (May 8): Prime Minister Tan Sri Muhyiddin Yassin has hailed the resolution of the legal tussle between Petroliam Nasional Bhd (Petronas) and the Sarawak State Government over the petroleum products sales tax issue.

He added that it will allow the State to be involved in the development of the oil and gas industry within its borders without impinging on Petronas’ role as the national oil company.

“Since the efforts to review the implementation of the 1963 Malaysia Agreement started officially in December 2018, the Sarawak Government and Petronas have succeeded in reaching a consensus to opt for a settlement in the negotiations on matters relating to oil and gas and petroleum products sales tax in Sarawak,” the Prime Minister said.

This resolution, he said, is the right approach in terms of the long-term economic, financial and social interest of the nation.

It is also in line with the Government’s Shared Prosperity Vision, which stresses on the sharing of economic prosperity across all income groups, ethnic groups and territories in this country, he added.

Muhyiddin said a committee, chaired by Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz and Senior Minister (Works) Datuk Seri Fadillah Yusof, will ensure that further talks are carried out towards reaching a deal that is accepted by all parties involved.

Earlier today, Petronas and the Sarawak Government announced that they have reached a settlement, whereby the oil company will pay in full the petroleum products sales tax imposed by the State for 2019, amounting to RM2 billion. The sales tax is 5% of the product’s sales value.

As part of the settlement, both Sarawak and Petronas have reached an agreement on the management of oil and gas assets in the State, and the sales tax on petroleum products.

In particular, it has been agreed that future petroleum products sales tax will be lower and staggered based on future negotiations, under the State Sales Tax (Taxable Goods and Rate of Tax)(Amendment)(No. 2) Order, 2018.

Additionally, the State Government has agreed that the sales tax will be limited to petroleum products stipulated under the order.

Following today’s agreement, Petronas retracted its appeal against the decision by the High Court in relation to a judicial review request dated March 13.

In return, the Sarawak Government has dropped all claims in its civil case against Petronas for the payment of petroleum products sales tax.

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Petronas to pay Sarawak RM2b sales tax for 2019, with resolution reached on future arrangements