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Yap said the 40 per cent revenue share was designed to ensure Sabah’s financial stability within the Federation. 

 

KOTA KINABALU: Former Sabah Cabinet Minister Datuk Yap Pak Leong said the 40 per cent income-sharing deal between Sabah and the Federal Government was the key reason why Sabah chose to join in forming Malaysia.

 

“Right from the start, I emphasised this share of 2/5 revenue to be a condition for Sabah to become part of Malaysia,” said Yap, one of the key players in the founding of Malaysia.

 

“Without this safeguard written in the Constitution, Sabah would not have been part of the formation of Malaysia,” the Sandakan Turf Club Chairman said in his talk titled “2/5 Sabah Revenue Share and Politics of Betrayal”, here, recently. 

 

The talk was organised by a non-governmental organisation, Sabah Action Body Advocating Rights (Sabar), just days before the July 18 deadline for Sabah’s special grant issue to be resolved. 

 

Yap said the 40 per cent revenue share was designed to ensure Sabah’s financial stability within the Federation.

  

“This 40 per cent share of revenue means the Federal side gets 60 per cent of revenue derived from Sabah and they can use the 60 per cent for Federal services in Sabah.

 

“The 40 per cent Sabah share is in addition to what the Federal Government normally does for their services, like defence and a lot of other things,” he said, adding this arrangement was not unique to Sabah. 

 

“Following Sabah’s request, Singapore negotiated a 60 per cent share of its revenue. However, Singapore’s arrangement differed slightly. 

 

“It (Singapore) was granted 60 per cent, but in the case of Singapore, they had to collect the revenue and to have expenses and then the 40 per cent net they would remit to the Federal Government,” he said. 

 

Yap said the implementation of this revenue-sharing agreement began smoothly with the Federal Government calculating and paying the 2/5 revenue to Sabah for the first few years after Malaysia’s formation. 

 

However, two very damaging events happened, disrupting the arrangement.  

 

“One is Singapore left Malaysia in 1965 and then in 1969 we had May 13,” Yap said. 

He said the May 13 incident led to the declaration of a state emergency in Sabah and the suspension of the Constitution which he believes was used as a pretext to cease payments to Sabah. 

 

“I think some people very cleverly used this excuse that now the Constitution is suspended, there is no need to pay Sabah the 2/5 per cent revenue anymore under the Constitution,” he said, describing it as a “betrayal of the Constitution, resulting in Sabah not getting its fair share.” 

 

Despite this historical setback, Yap is optimistic about recent developments. “I am very glad to learn that today, the State Government and the Federal Government have made promises to make amends and to let Sabah have its fair share of revenue.” 

 

He also noted that the Sabah Law Society has brought the matter to court. 

 

When asked about the formula for calculating the 40 per cent share, Yap admitted uncertainty but provided some insights. 

 

“As far as I understand, at least 80 per cent of revenue can be fixed easily. The other 20 per cent may be subject to question,” he said.

 

He listed several easily calculable sources of revenue, including stamp duty, road tax, export tax, oil tax, licences and interest charged by the Federal Government for loans in Sabah. 

 

Regarding the potential amount owed to Sabah, Yap said “Well, to calculate the amount from all sources, from all revenues, I do not have the official figures, so I cannot calculate.

 

“But I guess, as many people have guessed, that probably we should get about RM100 to RM150 billion. I mean, the Federal Government should be the one to calculate it. 

 

And if they do not do it, I doubt the State Government can calculate it,” he said. 

 

Yap also shared the origin of the 40 per cent idea, crediting his studies in Australia. “I studied economics there, including Federal Finance and there the laws are different,” he said. 

 

“In Australia, income tax was set by the state governments and the federal government didn’t start collecting income tax until the war. They said they would return after the World War II, but they never did. That is always how the federal government is. They do not give it back once they have it.

 

 

 

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https://www.dailyexpress.com.my/news/238074/40-the-reason-sabah-agreed-to-malaysia/