KPRU: Let PETRONAS Report to Parliament before Implementing GST

On August 27, 2012, Petroliam Nasional Bhd (PETRONAS) declared a lower dividend of RM27 billion to government this year, compared with RM30 billion in the previous year.[1] This signifies that government revenues will as well decline as PETRONAS being the largest income contributor reduces its payout.

On September 2, Prime Minister Datuk Seri Najib Tun Razak, who is also the Finance Minister announced that the price of the widely used RON95 and diesel would be increased 20 cents per litre. Pump price rise was indeed sudden. Najib said this is one of rationalization or restructuring of subsidies implemented gradually by the government. It is also one of the leading initiatives to ease country’s fiscal situation and to strengthen the financial position in midst of a challenging global economic environment.

The two announcements were made separately and seemed to be unrelated; think-tank Political Studies for Change (KPRU) nonetheless observed the correlation in between. KPRU argues that during such uncertain economic times, together with the decline of government’s revenue, the depreciation of our national currency, and a slow growth in economies whilst fiscal deficit remains high, slashing oil subsidies is deemed to be one of the measures to keep government’s spending low, and meanwhile replacing the declining government revenue. As the president of PETRONAS, Tan Sri Shamsul Azhar Abbas had announced earlier that PETRONAS wanted to adopt a 30 per cent dividend payout ration rather than paying a dividend of RM30 bilion consistently regardless of its profit level[2], oil price hike will soon be followed by the implementation of the Goods and Services Tax (GST).

Therefore, KPRU would like to suggest the government to amend the Petroleum Development Act 1974 for the coming Parliament session which will be convene on September 23rd before tabling the GST for the National Budget 2014. This is to ensure Petronas will be responsible to Parliament and not solely responsible to the Prime Minister to ensure the transparency in the governance of finance for both Petronas and the country.

This is also crucial not only to defend the interest of PETRONAS from being strangled by the government and forced to hand over its profits to the government without transparency, but this can as well help to answer the question of why fuel prices are not lowered when crude oil price within international market declines. In particular, as we taking into account the fact delivered by Datuk Seri Najib Tun Razak in the opening of the Asia Oil and Gas Seminar 2013 (AOGC) in Kuala Lumpur Convention Centre on 10 June that the oil and gas industry accounted for over 40 per cent of the country’s income. According to him, the government also expects PETRONAS will generate RM131.4 billion in Gross National Income (GNI).

As shown in the table below, PETRONAS is the largest taxpayer and the largest source of revenue, which accounts for at least 30 percent of the federal government revenue.

KPRU: Federal Government Revenue from Petroleum Resources 2009-2013

Year Total revenue contributed by petroleum (RM Million) Federal Government revenue (RM Million) Total contribution of petroleum as per government revenue (%)
2009 63,140 158,639 39.8
2010 55,313 159,653 34.6
2011 64,893 185,419 35.0
2012 66,138 207,246 31.9
2013 64,819 208,650 31.1

Copyright © KPRU 2013

Note: –

2009-2011: actual receipt

2012: revised estimate

2013: budget estimate

Source: Treasury Memorandums on the Federal Government’s Revenue Estimates

Since its establishment in 1974, PETRONAS has always been treated as a “piggy bank” of the government to provide funds for pet projects. Being a state-owned oil companies, Petronas is expected to share a big portion of profit to the government.According to PETRONAS figures, in the fiscal year ended March 31, 2011, the annual payout to the government gobbled up almost 55 percent of its net profits, which was well above the average of 38 percent paid by any other national oil companies around the world![3]

Nevertheless, the information regarding how the money is being spent has never been shown in Malaysia’s official accounts and the government has steadfastly refused to disclose any details about that.

 

Full report: https://kpru2010.wordpress.com/2013/09/05/kpru-biar-petronas-lapor-kepada-parlimen-sebelum-laksana-gst-2/

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