Unlawful for Malaysia government to withhold Sabah’s 40% share of federal revenue derived from state: High Court
The Kota Kinabalu High Court also issued a mandamus order, which compels Putrajaya to review the revenue allocation with the Sabah government.
A file photo of the Kota Kinabalu Court Complex. (Photo: Google Maps/Noor Aziah Norbit)
KOTA KINABALU: A high court in Malaysia on Friday (Oct 17) ruled that the Malaysian federal government has acted unlawfully by failing to fulfil the Borneo state’s right to 40 per cent of federal revenue derived from the state for nearly 50 years, local media reported.
Kota Kinabalu High Court judge Celestina Stuel Galid declared that the special grant arrangements between the federal and state governments were “unlawful, ultra vires, and irrational,” adding that they violated the federal constitution.
Ultra vires refers to an act that goes beyond the scope or in excess of legal power or authority.
“It is unlawful on the part of the federation to make the intended special grants under the 10th Schedule,” she was quoted as saying by Malaysiakini.
In addition to this, the court issued a mandamus order, which compels Putrajaya to review the revenue allocation with the Sabah government.
It had also ordered that an agreement be reached on Sabah’s 40 per cent share of federal revenue for each financial year from 1974 to 2021, with this process to be completed within 180 days, Malay Mail reported.
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The Sabah Law Society had filed for a judicial review on the case in 2022. It had argued that the 40 per cent grants from 1974 to 2021 remain payable, and that both the federal and Sabah governments had breached their constitutional duties by failing to review the payments in 1974 as required by law.
Sabah has for years been trying to negotiate a return of its entitlement of 40 per cent of its contribution to federal revenue as stated in the federal constitution, which it says is crucial for economic development.
The constitution centralises revenue collection - including all forms of taxes - at the federal level. The federal government then returns a percentage of this to the states based on their population.
In 2022, the federal and Sabah governments agreed on “interim” payments to the latter till 2026 instead, pending further negotiations on the original 40 per cent agreement.
The revenue-sharing formula has been a contentious issue for decades, and the topic of Sabah’s federal revenue may likely feature as a central theme during hustings for the upcoming state election.
On Thursday, Malaysia’s Election Commission announced that the state election on the Borneo island will be held on November 29, with Nomination Day set for November 15.
