Fong addresses the press conference held jointly with Sharifah Hasidah.
KUCHING: The
suggestion by constitutional law expert Emeritus Professor Datuk Dr
Shad Saleem Faruqi that Sarawak can only impose State Sales Tax (SST) on
items under the State List in the Constitution is incorrect, says State
Legal Counsel Dato Sri JC Fong.
“There is no restriction stated
in Article 95B(3) that the SST can only be imposed on those goods or
services forming the subject matters in List II or List IIA (State List)
in the Ninth Schedule of Federal Constitution,” he said through a press
statement delivered during a press conference at his office, here
yesterday.
Fong said the proper and only logical view must be that
the right of either Parliament or State Legislature to impose taxes
like SST or federal sales tax, does not depend on whether the matter or
goods is on the Federal List or State List.
He said it would
depend on the nature of the transaction, the income-generating activity
or in the case of SST or federal sales tax, whether the particular good
is declared a ‘taxable’ item and whenever a ‘sale’, as defined in the
law, occurs.
Shad Saleem made the remarks during a talk here on
Tuesday titled ‘The Spirit of the Malaysia Agreement 1963 in our
Constitution’, articulating what seems to be Petronas’ argument that
Sarawak cannot impose SST on petroleum products as such products are in
the Federal List.
Fong said the ‘spirit of MA63’ is clearly
expressed in paragraph 24(1) of the Inter-Governmental Committee Report
which is now an annexure to the Malaysia Agreement 1963 (MA63).
“Taxation,
including in particular customs and excise duties and taxes on incomes
and profits, should be a federal subject but each Borneo state should
have the power to impose a sales tax, if it wishes, provided that any
federal sale tax would take priority over a state sales tax and provided
that discriminatory rates would not be imposed on goods of the same
type but of different places of origin,” he said, adding this
recommendation is now incorporated into Article 95B(3) of the Federal
Constitution.
The recommendation and Article 95B(3)(c) clearly
envisage that SST and federal sales tax could be levied without
discrimination on goods of the same type, he pointed out.
However,
he said the federal sales tax shall be met out of sums collected from a
person liable for that tax before a charge for a state sales tax.
“This
means where a taxable person is charged both federal sales tax and
state sales tax on goods of the same type, federal sales tax enjoys
priority in payment,” he explained.
Among the goods subject to
federal sales tax listed in the Third Schedule to the Sales Tax (Rate of
Tax No. 2) Order [P.U.(A) 93/2008] are petroleum gases and other
hydrocarbons such as liquefied and natural gas.
Therefore,
pursuant to Article 95B(3) of the Federal Constitution, SST may also be
imposed on liquefied natural gas or ‘petroleum gases’ subject to the
condition that payment of federal sales tax by a taxable person takes
priority over payment of SST on the same type of goods, said Fong.
“Taking
Professor Shad and what he said is Petronas’ argument to its logical
conclusion and/or conversely, federal sales tax should not be levied on
matters in the State List.
“He pointed out, for instance, that
turtles and riverine fishing are matters in the State List. Then why are
turtle meat and freshwater fish listed as taxable goods in the First
Schedule to the Sales Tax (Rate of Tax No.2) Order, 2018?
“Since
forestry is in the State List, federal sales tax should not be imposed
on ‘dark red Meranti, light red Meranti and Meranti bakau’ produced from
logging licences issued by the state.”
Fong stressed that the
federal government’s imposition of federal sales tax on these items on
the State List serves to confirm that a sales tax may be levied by the
federal government on matters in the state list, and likewise, SST may
be levied on subject matters in the Federal List.
“It is a
cardinal rule of statutory, as well as constitutional, interpretation
that no one, including the Courts and ‘experts’ like Prof Shad should
read into the law, words or provisions which are not there, based on the
fundamental rule that judges and even ‘experts’ have no law-making or
law-amending powers.
“Therefore, there should not be read into the
clear provisions of Article 95B(3) of the Federal Constitution, any
words which have the effect of restricting or confining the rights of
the state to enacting laws to impose SST only on goods which are on the
State List.
“What is good for the goose is good for the gander, as
the saying goes. If there could be implied into Article 95B of the
Federal Constitution a restriction on the exercise by the State
Legislature to make laws to impose SST only on matters in the State
List, then logically or conversely, a similar restriction ought to be
read into the provisions of Article 96 which reads: ‘No tax or rate
shall be levied by or for the purposes of the federation except by or
under the authority of federal law.”
Fong went on to say that
Parliament cannot pass any federal law on matters listed in the State
List, and that federal purpose or ‘purposes of the federation’ is
defined in Article 160(2) to mean, inter alia, purposes of the
federation in connection with matters in which Parliament has power to
make laws otherwise than by virtue of Article 76.
Additionally,
Item 4(e) of List I (Federal List) covers ‘property and its transfer and
hypothecation, except land’, which means Parliament and the federal
government have no legislative or executive authority over transfer of
land or property, he added.
“If, it is legally permitted to read
into or implied in Article 96, that tax or rate can only be levied by
federal law on subject matters in the Federal List and for the purposes
of those subject matters, then federal law cannot levy tax or rate on
matters in the State List such as transfer of land [Item 2(c) in List II
of Ninth Schedule].
“In the premises, the constitutionality of
taxes like real property gains tax and stamp duties levied upon the
authority of federal laws, which have to be paid, on transfer of land,
could be successfully challenged in court.
“I am sure many
Sarawakians would want to take a similar stand like Petronas – not to
pay these types of federal taxes which they view as unconstitutional,
and the Registrar of Lands in Sarawak can be compelled by an order
mandamus from the court, to register instruments of land transfers which
have not been paid stamp duty.”
Fong remarked that what Shad
Saleem had said on Petronas’ argument was not only against the spirit of
MA63 but also, if he were right in his opinion, would open the
floodgates for taxpayers not paying taxes imposed by federal laws on
subject matters which are clearly under the State List such as transfer
of land, or for taxpayers to challenge in court the imposition of taxes
like real property gains tax and stamp duties whenever they transfer or
dispose of land.
Assistant Minister in the Chief Minister’s
Department (Law, State-Federal Relations and Project Monitoring)
Sharifah Hasidah Sayeed Aman Ghazali was present with Fong at the press
conference.
My comments:
So-called federal constitution 10/10/2019
The so-called federal constitution, is it based on MA57 or MA63? The
so-called Parliament has become so grotesque when they have messed up the
international treaty called MA63. What is the basis of constitution should be
the question that the Sarawak government should ask the Malaya = Malaysia
government. It is ridiculous to argue on when federal constitution with no
regards to MA63 which is believed widely as a fraud from the very beginning.
Did Sarawak and Sabah have the right to sign MA63 when they
were still colonised under the British government in 1963?
On 25th
February, 2019, the Mauritius government has claimed back the Chagos island
from the British government at the International Court of Justice. This precedent should serve as a very good
model for Sarawak and Sabah to follow the right course of action to settle 56
years of plundering, exploitation, oppression, suppression, robbing and
bullying. There is nothing to talk or
negotiate anymore. It is idiotic to
argue with the plunderer, exploiter, oppressor, suppressor, robber and bully.
Settle the matter at
the International Court of Justice, not at any imperialist and coloniser courts
in Malaya/Malaysia. There is no basis of
Justice in this whole organisation. Everything is one-sided to the advantage of
Malaya/Malaysia.