There is still way out of no way — economist

KOTA KINABALU: While it seems impossible for Sabah to turn back the clock to stop the Tourism Tax from being passed in the Parliament, there’s nonetheless still a way out of no way.

This is provided that the state government knows how to leverage on its unique position as the ‘fixed deposit’ state for the Barisan Nasional-led Federal government.

“The state government should procure an exemption for Sabah on the Tourism Tax just like the exemption on the Cabotage Policy and the exemption on Native Titles from Stamp Duties.

“Sabah and Sarawak voters are the fixed deposits of the Barisan Nasional (BN). They need us to form the federal government,” said Jeremiah Yee, Kota Kinabalu-based semiretired economist cum legal consultant.

He pointed out that the controversial Tourism Tax Act 2017 that gave birth to the impugned tax was derived from two items found in the Ninth Schedule of the Federal Constitution:

a) Item 7 (i) of List I (Federal List) that says the federal government has legislative authority over “fees in respect of any of the matters in the Federal List or dealt with by federal law”; and

b) Item 25A of the same list specifically indicating “tourism”

Yee was responding to the recent announcement on the implementation of the Tourism Tax throughout Malaysia with effect from 1st July 2017 by the Federal Minister for Tourism which raised a ruckus in Sabah.

“Hoteliers in particular are very unhappy and some campaigners from the opposition political parties even cited the Malaysia Agreement of 1963 (MA63) as basis for the protest.

“In spite of this, a read of the MA63 yielded nothing that says the federal government is prohibited from imposing a Tourism Tax on Sabah; correspondingly, the InterGovernmental Committee Report which was mentioned in the MA63 similarly contain no such prohibition. However, it was not disputed that Sabah shall have absolute control over local government, among others.

“After examining the Local Government Ordinance (Sabah Chapter 11 of 1961), it was revealed in Section 49 (46) (i) that Sabah local authorities shall ‘license and control lodging houses and hotels’. Be that as it is, there is nothing in this clause suggesting that the federal government is prohibited from levying a Tourism Tax,” Yee noted.

To better elucidate his points, he drew the following parallel:

“Land in Sabah as we all know is one of many items under the control of the state government. When a house in Sabah is sold, assessment or cess shall be paid to the local authority while quit rent and registration fees to the land office; but stamp duties and real property gains tax (if any) must still be paid to the federal government - notwithstanding my belief that both stamp duties and RPGTs derived from Sabah rightfully belong to the State exclusively because everything from the land, appurtenance, and administrative control are all in Sabah!

“Applying the land parallel to the present fiasco, despite the fact that the local authorities can charge fees to ‘license and control lodging houses and hotels’, this does not mean the federal government cannot collect income tax, GST, and now the impugned Tourism Tax from the same sector,” he reasoned.

Yee continued that a simple perusal of Item 6 of the Kota Kinabalu Municipal Council (Hotels and Lodging Houses) By-Laws 1966 unveiled that the mechanisms employed by both the local authorities and the federal government are actually identical.

“In such event, does that mean double taxation when one is a licensing fee whereas the other is a Tourism Tax respectively?

“Technically speaking, licensing fee and Tourism Tax are legally distinct and separate; in economics substance, however, both actually cumulate into a form of double taxation. Politically speaking, has the federal government through the Tourism Tax Act 2017 indirectly usurped the rightful autonomy of Sabah’s local government?

“Do you have the impression that our Members of Parliament from Sabah when they allowed ‘tourism’ to sneak into Item 25A of the Federal List have failed in their duty? Equally so, are the Sabah MPs who voted to allow the impugned tax on Sabah likewise ignorant? Take for example, why would you allow Putrajaya to collect a tax from a tourist who climbs our Mount Kinabalu? Who owns Mount Kinabalu, Putrajaya or Sabah?” he questioned.

Yee thus opined that it’s only appropriate that one questions whether the Tourism Tax on Sabah is uncons cionable and therefore an unjust enrichment?

“Does intuition tells you that the constitutional amendment putting ‘tourism into Federal control and the provision imposing the impugned tax on Sabah are both unconstitutional? Do these two items contravene the souls of common sense and ultra vires the essence of decency?” he asked.