Understanding Sabah’s tax revenue sharing entitlement

Sabah's tax revenue sharing entitlement has been a subject of legal disputes in Malaysian courts. The issue stems from Point 11 of the Inter-Governmental Committee (IGC) Report, which granted North Borneo (now Sabah) control over its finances, development and tariffs. This entitlement is rooted in Article 112C of the Federal Constitution, Section 2(1) of Part IV of the Tenth Schedule and Clauses (1), (3) and (4) of Article 112D.

These provisions establish Sabah's right to receive 40% of the federal government's net revenue derived from the region. Former Sabah minister Yap Pak Leong emphasized the historical significance of this 40% revenue sharing arrangement, stating that it was a fundamental condition for Sabah's decision to join Malaysia. Despite the federal government's apparent acceptance of Sabah's right to this entitlement, it has now objected to a High Court ruling in favor of the Sabah Law Society (SLS).

The SLS had directed the federal and state governments to review Sabah's revenue sharing arrangement within a specified period. Prime Minister Anwar Ibrahim had previously promised not to appeal the High Court's decision, but he seems to have abandoned this commitment. The state government's role in this legal battle has been questioned, as it entered the case as an intervener at a late stage and appears to be caught between legal and political considerations.

Meanwhile, another NGO, Sabah Action Body Advocating Rights (Sabar), has filed a separate legal challenge against the Territorial Sea Act (TSA) 2012, which limits Sabah's maritime boundary to just three nautical miles. While the Sabah government may have its own reasons for not initiating legal challenges regarding Sabah's rights, it is important to note that the state government possesses the authority to negotiate directly with the federal government on Sabah's behalf.

Despite the ongoing legal disputes, the people of Sabah continue to face the consequences of poverty, inadequate infrastructure, and limited economic opportunities. The 40% revenue sharing entitlement, which was meant to protect Sabah's interests from the outset, remains a crucial issue that warrants constitutional accountability and justice.