The government has endorsed a new plan of tax incentives proposed by Petronas which will be incorporated in the Petroleum Income Tax Act, Prime Minister Datuk Seri Najib Tun Razak said today.
He said five new incentives were proposed to promote the development of new oil resources, facilitate the exploitation of harder-to-reach oil fields and stimulate domestic explorations.
"By lowering risks and increasing the rewards for investment, this initiative will potentially lead to additional petroleum-generated revenue of more than RM50 billion for Malaysia over the next 20 years," he said when announcing nine new developments and Entry Point Projects of the Economic Transformation Programme here.
Najib said there would be a notional trade-off of about RM8 billion in the form of revenue foregone from investment tax allowances, reduced tax and the export duty waiver for marginal fields.
"But the benefits far exceed this trade-off and these measures mark the kind of rational policy changes that will enable the private sector to play a greater role in our economic development," he said.
The five new incentives are:
* Investment tax allowance of up to 60 to 100 per cent of capital expenditure to be deducted against statutory income to encourage the development of capital-intensive projects that is in the area of enhanced oil recovery, high carbon dioxide gas fields, high pressure high temperature, deepwater and infrastructure projects for petroleum operations;
* Reduced tax rate to 25 per cent from the current 38 per cent for marginal oil field development to improve commercial viability of the development;
* Accelerated capital allowance of up to five years from 10 years, where full utilisation of capital cost deducted could improve project viability;
* Qualifying exploration expenditure transfer between non-contiguous petroleum agreements with the same partnership or sole proprietor to enhance contractors'' risk-taking attitude, which could encourage higher levels of exploration activity; and
* Waiver of export duty on oil produced and exported from marginal field development to improve project viability.
