By Social Activist Remy Majangkim
KOTA KINABALU: In recent news, the Royal Malaysian Customs Department (JKDM) collected RM65.57 billion in indirect tax revenue for the year 2024, exceeding the initial target of RM56 billion set by the Ministry of Finance. Indirect tax includes import-export duties, sales tax, excise tax, tourism tax, and service tax.
Sabah entitlement derives from the Tenth “Schedule, Part V, ADDITIONAL SOURCES OF REVENUE ASSIGNED TO STATES OF SABAH AND SARAWAK.
It says, under Art 4, “In the case of Sabah, so long as medicine and health remain an item in the Concurrent list and expenses in respect of that item are borne by the State, 30 per cent of all customs revenue other than that in respect of the duties mentioned in sections 1, 2, and 3.”
This means that if medicine and health are still in List III – Concurrent List Item 7 (Federal Constitution), public health, sanitation (excluding sanitation in the federal capital), and diseases are prevented, Sabah has the right to receive its fair share.
So, how much funding does the state government receive from the federal government?
Based on the indirect tax revenue figure of RM 65.57 billion, the state should receive at least RM 19.671 billion at the 30% allocation.
The State Government of Sabah has the right to claim and receive 30% of the tax collected by the Royal Malaysian Customs.
This arrangement is unique to the State of Sabah, and so is direct tax under the Malaysian Internal Revenue (LHDN).
What is a direct tax? This involves corporate tax, income tax (for individuals and companies), capital gains tax, and stamp duty.
The arrangement outlined in the Tenth Schedule, Part III, regarding sources of revenue assigned to states under Article 2(1) states that
“In the case of Sabah, a grant of an amount equal in each year to two-fifths of the amount by which the net revenue derived by the Federation from Sabah exceeds the net revenue which would have been so derived in the year 1963.”
The financial arrangement made by the British was crucial during the negotiations in the Inter-Government Committee meetings and played a paramount role in the Malaysia Agreement.
There is no way around it, and there is no room for renegotiation.
The State Government, led by Gabungan Rakyat Sabah (GRS), must work closely with the Federal Government to assert our rights as stated in the Malaysia Agreement 1963 without delay. The agreement is clear and straightforward.
These funds have the potential to create a significant impact in the lives of Sabah’s 3.5 million residents, especially in strengthening public health services.
It is important that we also consider directing the remaining amount toward the proposed Sabah Sovereign Fund, ensuring a brighter future for our community.
