KUCHING: It has been noted that Sarawak had recorded its highest ever revenue performance in 2022, with a total of RM11.9 billion thus surpassing the projected revenue of RM10.2 billion by 17 per cent.
This has been described as ‘satisfactory’ by Premier Datuk Patinggi Tan Sri Abang Johari Tun Openg on Thursday (Feb 2).
But despite the positive performance, economist Carmelo Ferlito had raised concerns over the high dependence on Sales and Services Tax (SST), which made up 84 per cent of the state’s fiscal revenue.
Speaking to New Sarawak Tribune yesterday, Ferlito pointed out that this heavy reliance on indirect taxation indicates a narrow income tax base, with many households in Sarawak earning less than the minimum taxable income.
“The sources of tax revenue are limited and come primarily from a few specific sources, rather than being spread out among many sources.
“In the case of Sarawak, it is reported that 84 per cent of its fiscal revenues are made up of SST. This can be concerning because SST is an indirect tax, meaning that it is levied on the sale of goods and services rather than on the income of individuals or businesses. As a result, SST revenue can be affected by changes in market prices and consumer behavior,” he said.
Furthermore, he said the improved SST collection was due to higher market prices for important commodities, which made the revenue source extremely unstable and dependent on commodity price fluctuations.
“For example, if prices of the commodities that contribute to SST, such as oil and gas products and oil palm products, increase, SST revenue will increase. But if prices decline, SST revenue will decrease,” said Ferlito, who is also the chief executive officer of centre for market education (CME).
This makes long-term development planning more complicated and uncertain.
“It can create challenges for the government in terms of budgeting and economic planning, as it relies on factors outside of its control to maintain a stable revenue stream,” he warned.
The announcement by Abang Johari yesterday had raised questions about the sustainability of Sarawak’s revenue performance and the need to diversify its sources of income for the government to support its development plans.
Sarawak’s revenue was made up of four main categories, with tax revenue contributing 56 per cent of the total revenue. The remaining 44 per cent of the revenue was made up of non-tax revenue, non-revenue receipts, and federal grants and reimbursements.
The improved performance in SST collection was due to higher market prices in 2022 for oil and gas products and oil palm products.
He had acknowledged the concerns rose by Ferlito and had stated that they will continue to study and look into various key initiatives to increase the state’s revenue through enhancing, widening, and diversifying its revenue sources such as enforcing the state’s dividend policy on statutory bodies and government linked companies (GLCs) and imposing SST on coal.
