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THIS write-up is based on the presentation by Datuk Petrus Gimbad on the MA63 Special Grant, and it is worth saying plainly that his work does something most discussions on this subject have avoided for decades – it reduces the issue to its mechanics. 

Once that is done, the illusion that this is a complicated or indeterminate claim begins to fall away. What remains is far more uncomfortable. 

The problem has never been the absence of a formula. It has been the failure to do the work required to apply it.

At its core, the issue is simple: Sabah is entitled to 40% of the revenue derived from the State that is retained by the Federation, after excluding what already belongs to Sabah.

The Structure Was Always Clear

The constitutional position has never been in doubt. All revenue derived from Sabah is collected by the Federation and paid into the Federal Consolidated Fund, subject only to specific categories assigned back to the State. 

Revenues assigned to the State are collected and retained in the State Consolidated Fund and therefore fall outside the computation. 

The focus of the Special Grant is on the balance — namely, revenue derived from Sabah that is collected by the Federation and paid into the Federal Consolidated Fund.

Once those assigned revenues are excluded, what remains is the “net revenue” derived from Sabah.

From that figure, Sabah is entitled to forty per cent, measured against the 1963 base year.

There is nothing vague about this. It is not a political understanding. It is not a matter for negotiation. It is a defined fiscal mechanism. 

Petrus Gimbad’s illustration shows the process in its simplest form - identify the gross revenue, deduct the assignments, establish the net figure, and apply the 40% entitlement. 

For more than fifty years, the argument has circled around entitlement. It should not have. The entitlement was never the issue.

The Failure Was in Establishing the Amount

What Datuk Petrus’ work exposes—quietly but decisively—is that the real failure lies in the absence of a properly established figure. 

Sabah did not lose this claim because the law was unclear. It stalled because the exercise required to quantify it was never carried through with discipline.

Part of the problem has been a persistent misunderstanding of what “net revenue” actually includes. It is not confined to tax.

It extends to the full range of federal revenue streams sourced from Sabah - customs duties, licences, permits, dividends, interest, and sector-specific levies. 

Any attempt to reduce the calculation to a narrower base inevitably understates the entitlement.

The task, therefore, is not theoretical. It is administrative and evidential. It requires the systematic identification of all revenue derived from Sabah and the consolidation of that data into a figure that can withstand scrutiny. That work should have been done decades ago. It was not.

The Hard Truth - Sabah’s Revenue Is Not Even Properly Captured

The most revealing part of Datuk Petrus’ analysis lies in his treatment of corporate taxation. A significant portion of revenue generated in Sabah is not recorded as such. 

Many companies operating in the State report and pay taxes through offices located outside the State. 

The consequence is straightforward. If the data is not extracted and corrected, Sabah’s contribution is understated from the outset.

Where businesses operate through separately incorporated Sabah entities, the position is relatively clear. Where they operate through divisions or integrated structures across multiple states, the exercise becomes more demanding. 

It requires access to divisional accounts, the restatement of profits, and the application of transfer pricing principles to ensure that income is allocated on an arm’s-length basis.

This is not an abstract difficulty. It is routine in tax practice. What has been missing is not the method, but the will to carry it through. 

For decades, the argument has persisted in the absence of the underlying work needed to resolve it.

A Practical Solution Was Always Available

One of the strengths of Datuk Petrus Gimbad’s work is that it does not stop at identifying the problem. It sets out a practical way forward.

The proposed two-stage approach is both simple and workable. 

The first stage is a progress claim based on reported government revenue, which should already be available and largely undisputed.  The second stage is a final claim that incorporates adjustments to properly attribute business income, including the computation of notional tax where necessary. 

This approach removes the main excuse that has delayed the claim for years—the insistence on a perfect figure before any payment can be made.

It allows Sabah to move immediately on what is already known, while completing the more technical work in parallel.

The fact that this has not been implemented is telling. The obstacle has not been feasibility. It has been execution.

Interim Payments Without a Basis Mean Very Little

The RM300 million payment reported in 2023 is a case in point. Described as an interim payment, it raises a simple question - interim against what?

Without a properly established baseline, any figure—whether RM300 million or RM3 billion—has no clear constitutional anchor. It becomes a matter of discretion rather than obligation.

Petrus also points to a deeper concern, which has received far less attention than it deserves. 

Matters of this nature should be grounded in proper deliberation within the State before engagement at the federal level. 

Without that foundation, the claim lacks the institutional weight needed to sustain it, and public confidence is inevitably weakened.

The “No Money” Argument Misses the Point

The suggestion that the Federal Government may not have the financial capacity to meet the obligation has been repeated often enough to sound persuasive. It is also beside the point.

The constitutional sequence is clear. The amount must first be established. 

Only then can discussions take place as to how it is to be paid.

To collapse those steps into one is to avoid the real issue. You do not negotiate the existence of a debt by first asking whether the debtor is comfortable paying it.

What This Really Comes Down To

Petrus Gimbad’s work strips this issue of its last convenient excuse. The law is clear. The formula is clear. The methodology exists. The data, while complex, is not beyond reach.

For more than 50 years, this was not a failure of understanding. It was a failure of execution—by those who resisted it, and by those who did not pursue it with the discipline it required.

Until that changes, the 40% will remain a claim spoken about, rather than a right enforced.

And when it is finally is enforced, the real question will not be why it took so long, but why it was ever allowed to.

The views expressed here are the views of the writer and do not necessarily reflect those of the Daily Express. If you have something to share, write to us at: Forum@dailyexpress.com.my