MP rebukes Anwar for misleading statement on Sabah allocation

Beluran MP Ronald Kiandee has taken Prime Minister Anwar Ibrahim to task over the issue of federal government allocations to Sabah.

Ronald said that the prime minister had neglected to take into account that Sabah is entitled to an additional 40 percent of federal revenues and taxes derived from Sabah when Anwar announced that the federal government has allocated RM16 billion to the state.

This would come up to about RM4 billion, based on Anwar’s announcement that the federal government collected RM10.2 billion in taxes and revenue from Sabah last year.

“So the statement by the prime minister actually neglects to take into account that the development expenditure allocated to Sabah cannot be equated to the usual compulsory allocation given to all states.

“The RM16 billion indeed must be given to Sabah but so does the 40 percent, as stated in Article 112C of the Federal Constitution.

“The federal government and Sabah must always uphold and abide by the Federal Constitution to ensure an equitable federation for mutual benefit, in the interest of Malaysia,” said the Sabah Perikatan Nasional chairperson.

The former Dewan Rakyat deputy speaker added that the compulsory allocation to all states should not be conflated by the special grant because it is covered under a different section of the Federal Constitution, namely Section 109.

He said the Constitution also allows for a revision of this rate of 40 percent every five years but the federal government has thus far not done so.

Legal dispute over Sabah’s tax revenue

Last week Anwar clarified that the RM16 billion allocation that he announced at a Kaamatan Festival in Sabah on May 13 is the total allocation for the state this year, not just for development projects.

He said the amount covers various expenditures including schools, education, border security, and overall state development, and that this exceeds 40 percent of federal revenue and taxes derived from Sabah.

His remarks were made amid the Sabah Law Society’s (SLS) legal dispute with the federal government over the latter’s failure to pay the 40 percent special grant from 1972 to 2022.

READ MORE: KINIGUIDE | Sabah's legal battle for its tax revenue

Two years ago, SLS filed a judicial review bid to nullify the federal government’s gazette of an RM125.6 million annual grant for Sabah, claiming it violated the state’s revenue rights under the Malaysia Agreement 1963.

In June, the Kota Kinabalu High Court granted leave for SLS to proceed with the action and the Court of Appeal upheld the greenlight.

In July, the attorney-general filed a bid for leave to appeal to the Federal Court over the matter.

New formula for allocation

According to news reports, following the first review under Article 112D in 1969, the two governments agreed on the following amounts in lieu of the grants for Sabah under Article 112C(1)(a): RM20 million in 1969, RM21.5 million in 1970, RM23.1 million in 1971, RM24.8 million in 1972, and RM26.7 million in 1973.

A second review is supposed to have taken place in 1974 but purportedly did not materialise.

Instead, according to a parliamentary reply on March 6 last year, Sabah has been paid RM26.7 million for each subsequent year until a review took place in 2022.

The new arrangement after the 2022 review is as follows, according to the Federal Gazette in April 2022: RM125.6 million in 2022, RM129.7 million in 2023, RM133.8 million in 2024, RM138.1 million in 2025, and RM142.6 million in 2026.

The total comes to RM669.8 million over five years.

Anwar told Parliament in his written reply to Keningau MP Jeffrey Kitingan that there are pending negotiations for a new formula.

The current Sabah administration under Gabungan Rakyat Sabah’s Hajiji Noor also indicated that the state would insist on its entitlement to 40 percent of federal revenue derived from the state.

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