What more can be done on the 40pc issue
Published on: Sunday, August 11, 2024
By: Datuk Roger Chin
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Understanding Article 97 of the Federal Constitution
Article 97 of the Federal Constitution addresses the custody of public funds, stipulating that all revenues collected by the Federation shall be paid into the Federal Consolidated Fund.
The article also establishes State Consolidated Funds for each state, specifying that revenues raised by a state shall be paid into its respective fund. Key provisions include:
Federal Consolidated Fund (Article 97(1)): All revenues collected by the Federal Government are to be paid into this fund, from which expenditures are appropriated according to parliamentary approval.
State Consolidated Funds (Article 97(2)): Each state has its own consolidated fund, into which revenues raised by the state are deposited.
The Sabah 40% Revenue Entitlement Issue
Sabah’s 40% revenue entitlement refers to the constitutional provision entitling Sabah to 40% of the net revenue derived by the Federal Government from the state.
This entitlement is rooted in the Malaysia Agreement 1963 (MA63), which includes terms for Sabah’s and Sarawak’s revenue entitlements. Over the years, disagreements over calculations and non-compliance with the agreed terms have caused significant disputes.
Proposal for Amendment
To address this longstanding issue, Sabah should propose an amendment to Article 97 to enable the state to collect revenues directly and deposit them into its State Consolidated Fund. The proposed changes include:
Amending Article 97(1): Add an exception for Sabah, allowing the state to collect certain federal revenues directly.
Proposed Text:
“Notwithstanding anything in this clause, the State of Sabah shall have the authority to collect revenues as specified under the Tenth Schedule directly, which shall be deposited into the State Consolidated Fund of Sabah.”
Inserting a New Clause in Article 97: Introduce a new clause to define the specific revenues that Sabah is entitled to collect and manage.
Proposed Text:
“Article 97A: The State of Sabah shall collect revenues from taxes, duties, and other sources as listed in the Tenth Schedule, Part V, and such revenues shall be paid into the State Consolidated Fund of Sabah.”
Amending the Tenth Schedule: Clarify and enumerate the specific types of revenues to be collected by Sabah, including defining the calculation method for the 40% entitlement and listing relevant revenue sources such as income taxes, import duties, excise duties, and export duties derived from Sabah.
Example of Proposed Text:
“Part V: The revenues from the following sources shall be collected by the State of Sabah and deposited into its State Consolidated Fund:
Income taxes from individuals and companies residing or operating in Sabah.
Import duties on goods brought into Sabah.
Excise duties on goods manufactured in or imported into Sabah.
Export duties on goods produced in Sabah.”
Historical Context
The Malaysia Agreement 1963 (MA63) is the cornerstone for understanding Sabah’s and Sarawak’s entitlements. Any proposed amendment must align with the principles of this agreement. Revisiting and reaffirming the terms of MA63 could provide a robust foundation for the proposed changes.
Legal and Political Feasibility
Amending the Federal Constitution is a complex process that requires significant political will and legal scrutiny.
The amendment process in Malaysia requires a two-thirds majority in both Houses of Parliament, making bipartisan support essential. Engaging with federal and state legislators from both ruling and opposition parties is crucial.
Economic Implications
Direct collection of revenues by Sabah would have substantial economic implications for both the state and the federal government. Detailed economic analysis and negotiations are necessary to ensure that the proposed changes do not adversely affect the national economy while empowering Sabah to better manage its financial resources.
Steps to Seek Amendment
State Government Resolution - The Sabah State Legislative Assembly should pass a resolution formally requesting the amendment of Article 97 and relevant parts of the Tenth Schedule.
Bipartisan Support - Engage with federal and state legislators from both ruling and opposition parties to garner bipartisan support.
Public Advocacy and Engagement - Launch a public advocacy campaign to raise awareness about the issue. Engaging with civil society, business communities, and the general public can build broad-based support for the amendment.
Federal-State Negotiations - Initiate negotiations with the Federal Government to discuss the technicalities of the amendment and ensure that the proposed changes align with national interests while addressing Sabah’s needs.
Drafting the Amendment Bill - Collaborate with constitutional experts to draft the amendment Bill, ensuring it is legally sound and addresses all relevant aspects of revenue collection and distribution.
Parliamentary Process - Once drafted, the Bill should be tabled in Parliament for debate and approval. Continuous engagement with MPs and senators is crucial during this stage to ensure the passage of the Bill.
Amending Article 97 of the Federal Constitution to allow Sabah to collect and manage its revenues is a crucial step towards addressing the 40% revenue entitlement issue.
By taking a strategic approach involving legislative action, bipartisan support, public engagement, and thorough negotiations, Sabah can work towards a more equitable and transparent revenue distribution system.
This amendment not only aligns with the spirit of federalism but also empowers Sabah to better manage its financial resources for sustainable development and prosperity.
The proposed changes must be carefully crafted to reflect the historical context, legal feasibility, and economic implications, ensuring a balanced and fair approach to revenue distribution.
The views expressed here are the views of the writer and do not necessarily reflect those of the Daily Express.
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