Impact of GST and Falling Oil Prices on State Revenue

As enshrined in Article 95B (3) of the Federal Constitution, the State of Sarawak is empowered to impose sales tax.

Minister of Finance II Dato' Sri Wong Soon Koh said that, by virtue of Part V, Tenth Schedule of the Federal Constitution, revenue from State Sales Tax is assigned to the State of Sarawak as an additional source of revenue

He said that, the power of the State to levy sales tax cannot be revoked and the financial interest of the State is safeguarded by the provision under Article 110(2) which stipulated that, “Parliament may from to the time by law substitute for any source of revenue specified in section 1,2,3,4,5,6,7,8,12 or 14 of Part III of Tenth Schedule or for any source of revenue so substituted, another source of revenue of substantially equal value.”

"Hence, revenues assigned to the state will not be diminished by Parliament removing any source of revenue assigned to the state or substituting a source of revenue with the one that would yield less quantum for the state."

He stated that, the implementation of GST will not supersede the state sales tax or take away the existing taxes already imposed and thus, would not affect the rights of state to impose sales tax. The state will continue to collect states tax and receive revenues from this source.

Wong said this in his winding-up speech for his Ministry during the Legislative Assembly sitting at Petra Jaya, Kuching today.

On the lower oil price and its implication on the State Revenue, Masing said that, oil and gas royalty is one of the major sources of revenue to the state. We are aware of the impact of oil price volatility. In fact, the state has always adopted a very conservative approach in its annual revenue projection from oil and gas.

"Hence, the recent decline in oil prices will not greatly impact the State Revenue and we are confident that the state can achieve its revenue projection for oil and gas royalty of RM1,715 million for the year."

"As highlighted earlier, the state revenue derived from royalty on oil and gas is always subject to price fluctuations," he said adding that, the mitigate the impact on revenue due to the decline in oil prices, the state has over the years diversifying its sources of revenue besides adopting a conservative strategy in its revenue projection. - Sarawakiana