PART VII. FINANCIAL PROVISIONS
Chapter 1. General
96. No taxation unless authorised by law
No tax or rate shall be levied by or for the purposes of the Federation except by or under the authority of federal law.
97. Consolidated Funds
- All revenues and moneys howsoever raised or received by the Federation shall, subject to the provisions of this Constitution and of federal law, be paid into and form one fund, to be known as the Federal Consolidated Fund.
- All revenues and moneys howsoever raised or received by a State shall, subject to Clause (3) and to any law, be paid into and form one fund, to be known as the Consolidated Fund of that State.
- If in accordance with State law or in respect of the Federal Territories of Kuala Lumpur, Labuan and Putrajaya, in accordance with federal law any Zakat, Fitrah, Baitulmal or similar Islamic religious revenue is raised, it shall be paid into a separate fund and shall not be paid out except under the authority of State law or federal law, as the case may be.
- Unless the context otherwise requires, any reference in this Constitution to the Consolidated Fund shall be construed as a reference to the Federal Consolidated Fund.
98. Expenditure charged on Federal Consolidated Fund
- There shall be charged on the Consolidated Fund, in addition to any grant, remuneration or other moneys so charged by any other Article or federal law-
- all pensions, compensation for loss of office and gratuities for which the Federation is liable;
- all debt charges for which the Federation is liable; and
- any moneys required to satisfy any judgment, decision or award against the Federation by any court or tribunal.
- In making payment of any grant to a State in accordance with the provisions of this Part, the Federation may deduct the amount of any debt charges payable to the Federation by the State and charged on the Consolidated Fund of that State.
- For the purposes of this Article debt charges include interest, sinking fund charges, the repayment or amortisation of debt, and all expenditure in connection with the raising of loans on the security of the Consolidated fund and the service and redemption of debt created thereby.
99. Annual financial statement
- The Yang di-Pertuan Agong shall, in respect of every financial year, cause to be laid before the House of Representatives a statement of the estimated receipts and expenditure of the Federation for that year, and, unless Parliament in respect of any year otherwise provides, that statement shall be so laid before the commencement of that year:Provided that there may be separate statements of estimated receipts and estimated expenditure, and in that case it shall not be necessary for the statement of receipts to be so laid before the commencement of the year to which it relates.
- The estimates of expenditure shall show-
- the total sums required to meet expenditure charged on the Consolidated Fund; and
- subject to Clause (3), the sums required to meet the expenditure for other purposes proposed to be met from the Consolidated Fund.
- The sums to be shown under paragraph (b) of Clause (2) do not include-
- sums representing the proceeds of any loan raised by the Federation for specific purposes and appropriated for those purposes by the Act authorising the raising of the loan;
- sums representing any money or interest on money received by the Federation subject to a trust and to be applied in accordance with the terms of the trust;
- sums representing any money held by the Federation which has been received or appropriated for the purpose of any trust fund established by or in accordance with federal law.
- The said statement shall also show, so far as is practicable, the assets and liabilities of the Federation at the end of the last completed financial year, the manner in which those assets are invested or held, and the general purposes in respect of which those liabilities are outstanding.
100. Supply Bills
The expenditure to be met from the Consolidated Fund but not charged thereon, other than expenditure to be met by such sums as are mentioned in Clause (3) of Article 99, shall be included in a Bill, to be known as a Supply Bill, providing for the issue from the Consolidated Fund of the sums necessary to meet that expenditure and the appropriation of those sums for the purposes specified therein.
101. Supplementary and excess expenditure
If in respect of any financial year it is found-
- that the amount appropriated by the Supply Act for any purpose is insufficient, or that a need has arisen for expenditure for a purpose for which no amount has been appropriated by the Supply Act; or
- that any moneys have been expended for any purpose in excess of the amount (if any) appropriated for that purpose by the Supply Act,
a supplementary estimate showing the sums required or spent shall be laid before the House of Representatives and the purposes of any such expenditure shall be included in a supply Bill.
102. Power to authorise expenditure on account or for unspecified purposes
Parliament shall have power in respect of any financial year-
- before the passing of the Supply Bill, to authorise by law expenditure for part of the year;
- to authorise by law expenditure for the whole or part of the year otherwise than in accordance with Articles 99 to 101, if owing to the magnitude or indefinite character of any service or to circumstances of unusual urgency it appears to Parliament to be desirable to do so.
103. Contingencies Fund
- Parliament may by law provide for the creation of a Contingencies Fund and for authorising the Minister charged with responsibility for finance, if satisfied that there has arisen an urgent and unforeseen need for expenditure for which no other provision exists, to make advances from the Contingencies Fund to meet that need.
- Where any advance is made in accordance with Clause (1), a supplementary estimate shall be presented and a Supply Bill introduced as soon as possible for the purpose of replacing the amount so advanced.
104. Withdrawals from Consolidated Fund
- Subject to Clause (2), no moneys shall be withdrawn from the Consolidated Fund unless they are-
- charged on the Consolidated Fund; or
- authorised to be issued by a Supply Act; or
- authorised to be issued under Article 102.
- Clause (1) does not apply to any such sums as are mentioned in Clause (3) of Article 99.
- No moneys shall be withdrawn from the Consolidated Fund except in the manner provided by federal law.
105. Auditor General
- There shall be an Auditor General, who shall be appointed by the Yang di-Pertuan Agong on the advice of the Prime Minister and after consultation with the Conference of Rulers.
- A person who has held the office of Auditor General shall be eligible for reappointment but shall not be eligible for any other appointment in the service of the Federation or for any appointment in the service of a State.
- The Auditor General may at any time resign his office but shall not be removed from office except on the like grounds and in the like manner as a judge of the Federal Court.
- Parliament shall by law provide for the remuneration of the Auditor General, and the remuneration so provided shall be charged on the Consolidated Fund.
- The remuneration and other terms of office (including pension rights) of the Auditor General shall not be altered to his disadvantage after his appointment.
- Subject to the provisions of this Article, the terms and conditions of service of the Auditor General shall be determined by federal law and, subject to the provisions of federal law, by the Yang di-Pertuan Agong.
106. Powers and duties of Auditor General
- The accounts of the Federation and of the States shall be audited and reported on by the Auditor General.
- The Auditor General shall perform such other duties and exercise such powers in relation to the accounts of the Federation and of the States and to the accounts of other public authorities and of those bodies which are specified by order made by the Yang di- Pertuan Agong, as may be provided by federal law.
107. Reports of Auditor General
- The Auditor General shall submit his reports to the Yang di-Pertuan Agong, who shall cause them to be laid before the House of Representatives.
- A copy of any such report relating to the accounts of a State, or to the accounts of any public authority exercising powers conferred by State law, shall be submitted to the Ruler or Yang di-Pertua Negeri of that State, who shall cause it to be laid before the Legislative Assembly.
108. National Finance Council
- There shall be a National Finance Council consisting of the Prime Minister, such other Ministers as the Prime Minister may designate, and one representative from each of the States, appointed by the Ruler or Yang di-Pertua Negeri.
- The National Finance Council shall be summoned to meet by the Prime Minister as often as he considers necessary and whenever the representatives of three or more States demand a meeting, but there shall be at least one meeting in every twelve months.
- At any meeting of the National Finance Council the Prime Minister may be represented by another Minister of the Federation, and the Prime Minister or, if he is not present, the Minister representing him, shall preside.
- It shall be the duty of the Federal Government to consult the National Finance Council in respect of-
- the making of grants by the Federation to the States;
- the assignment to the States of the whole or any portion of the proceeds of any federal tax or fee;
- the annual loan requirements of the Federation and the States and the exercise by the Federation and the States of their borrowing powers;
- the making of loans to any of the States;
- the making of development plans in accordance with Article 92;
- the matters referred to in Item 7 (f) and (g) of the Federal List;
- any proposal to introduce a Bill for such a law as is mentioned in Clause (2) Article 109 or Clause (3) or (3A) Article 110;
- any other matter in respect of which this Constitution or federal law makes provision for consultation with the National Finance Council.
- The Federal Government may consult the National Finance Council in respect of any other matter, whether or not it involves questions of finance, and the government of a State may consult the said Council in respect of any matter which affects the financial position of that State.
109. Grants to States
- The Federation shall make to each State in respect of each financial year-
- a grant, to be known as a capitation grant, which shall be calculated in accordance with the provisions of Part I of the Tenth Schedule;
- a grant for the maintenance of State road, to be known as the State road grant, which shall be calculated in accordance with the provisions of Part II of that Schedule.
- Parliament may from time to time by law vary the rates of the capitation grant; but if the effect of any such law is to reduce the grant, provision shall be made in that law for securing that the amount of grant received by any State in respect of any financial year is not less than ninety per cent of the amount received by that State in the preceding financial year.
- Parliament may by law make grants for specific purposes to any of the States on such terms and conditions as may be provided by any such law.
- The amounts required for making the grants mentioned in the preceding provisions of this Article shall be charged on the Consolidated Fund.
- If, in accordance with Article 103, a Contingencies Fund is created, the power to make advances from that Fund for meeting an urgent and unforeseen need for expenditure shall include power to make such advances to a State for meeting such a need.
- The Federation shall pay into a fund, to be known as the State Reserve Fund-
- in respect of every financial year such sum as the Federal Government may, after consultation with the National Finance Council, determine to be necessary,
and the Federation may from time to time, after consultation with the National Finance Council, make grants out of the State Reserve Fund to any State for the purposes of development or generally to supplement its revenues.
110. Assignment of taxes and fees to the States
- Subject to Clause (2), each of the States shall receive all proceeds from the taxes, fees and other sources of revenue specified in Part III of the Tenth Schedule so far as collected, levied or raised within the State.
- Parliament may from time to time by law substitute for any source of revenue specified in section 1, 3, 4, 5, 6, 7, 8, 12 or 14 of Part III of the Tenth Schedule or for any source of revenue so substituted, another source of revenue of substantially equal value.
- Each State shall receive, on such terms and conditions as may be provided by or under federal law, ten per cent or such greater amount as may be so provided of the export duty on tin produced in the State.
- Parliament may by law provide that each State shall receive, on such terms and conditions as may be prescribed by or under federal law, such proportion as may be so prescribed of the export duty on minerals (other than tin) produced in the State.In this Article “minerals” means mineral ores, mental and mineral oils.
- Without prejudice to the power to impose conditions conferred by Clause (3) or (3A), Parliament may by law provide for prohibiting or restricting, in, or except in, such cases as may be provided by or under the law, the levying of royalties on or similar charges in respect of minerals (whether under a lease or other instrument or under any State enactment, and whether the instrument was made or the enactment passed before or after the coming into operation of this Clause).
- Without prejudice to the provisions of Clauses (1) to (3A), Parliament may by law-
- assign to the States the whole or any portion of the proceeds of any tax or fee raised or levied by the Federation; and
- assign to the States the responsibility of collecting for State purposes any tax or fee authorised by federal law.
- The amounts receivable by the States under Clause (1), (2) or (4) shall not be paid into the Consolidated Fund; and the amounts receivable by the States under Clauses (3) and (3A) shall be charged on the Consolidated Fund.
111. Restriction on borrowing
- The Federation shall not borrow except under the authority of federal law.
- A State shall not borrow except under the authority of State law, and State law shall not authorise a State to borrow except from the Federation or, for a period not exceeding five years, from a bank or other financial source approved for that purpose by the Federal Government, and subject to such conditions as may be specified by the Federal Government.
- A State shall not give any guarantee except under the authority of State law, and such guarantee shall not be given except with the approval of the Federal Government and subject to such conditions as may be specified by it.
112. Restriction on alterations in establishments of States
- Subject to Clause (2), no State shall, without the approval of the Federation, make any addition to its establishment or the establishment of any of its departments, or alter the rates of established salaries and emoluments, if the effect of doing so would be to increase the liability of the Federation in respect of pensions, gratuities or other like allowances.
- This Article does not apply to-
- non-pensionable appointments the maximum salaries of which do not exceed four hundred ringgit per month or such other amount as may be fixed by order by the Yang di- Pertuan Agong; or
- pensionable appointments the maximum salaries of which do not exceed one hundred ringgit per month or such other amount as may be fixed by order by the Yang di-Pertuan Agong.
Chapter 2. Application to States of Sabah and Sarawak
112A. State audits in States of Sabah and Sarawak
- The Auditor General shall submit his reports relating to the accounts of each of the States of Sabah and Sarawak, or to the accounts of any public authority exercising powers vested in it by the State law in either of those States, to the Yang di-Pertuan Agong (who shall cause them to be laid before the House of Representatives) and to the Yang di-Pertua Negeri of the State; and accordingly Clause (2) of Article 107 shall not apply to those reports.
- The Yang di-Pertua Negeri shall cause any such report submitted to him to be laid before the Legislative Assembly.
- The powers and duties of the Auditor General in relation to the accounts mentioned in Clause (1) for any period ending before the year 1969 shall, in the State of Sabah or Sarawak, be exercised and discharged on his behalf by the senior officer of his department for the time being stationed in the State in question:Provided that during the absence or incapacity of that officer, or a vacancy in his post, those powers and duties shall be exercised and discharged by the Auditor General or such officer of his department as he may designate.
112B. Borrowing powers of States of Sabah and Sarawak
Clause (2) of Article 111 shall not restrict the power of the State of Sabah or Sarawak to borrow under the authority of State law within the State, if the borrowing has the approval of the Central Bank for the time being of the Federation.
112C. Special grants and assignments of revenue to States of Sabah and Sarawak
- Subject to the provisions of Article 112D and to any limitation expressed in the relevant section of the Tenth Schedule-
- the Federation shall make to the States of Sabah and Sarawak in respect of each financial year the grants specified in Part IV of that Schedule; and
- each of those States shall receive all proceeds from the taxes, fees and dues specified in Part V of that Schedule, so far as collected, levied or raised within the States, or such part of those proceeds as is so specified.
- The amounts required for making the grants specified in the said Part IV, and the amounts receivable by the State of Sabah or Sarawak under section 3 or 4 of the said Part V, shall be charged on the Consolidated Fund; and the amounts otherwise receivable by the State of Sabah or Sarawak under the said Part V shall not be paid into the Consolidated Fund.
- In Article 110, Clauses (3A) and (4) shall not apply to the State of Sabah or Sarawak.
- Subject to Clause (5) of Article 112D, in relation to the State of Sabah or Sarawak Clause (3B) of Article 110-
- shall apply in relation to all minerals, including mineral oils; but
- shall not authorise Parliament to prohibit the levying of royalties on any mineral by the State or to restrict the royalties that may be levied in any case so that the State is not entitled to receive a royalty amounting to ten per cent ad valorem (calculated as for export duty).
112D. Reviews of special grants to State of Sabah and Sarawak
- The grants specified in section 1 and subsection (1) of section 2 of Part IV of the Tenth Schedule, and any substituted or additional grant made by virtue of this Clause, shall at the intervals mentioned in Clause (4) be reviewed by the Governments of the Federation and the States or State concerned, and if they agree on the alteration or abolition of any of those grants, or the making of another grant instead of or as well as those grants or any of them, the said Part IV and Clause (2) of Article 112C shall be modified by order of the Yang di-Pertuan Agong as may be necessary to give effect to the agreement:Provided that on the first review the grant specified in subsection (2) of section 1 of the said Part IV shall not be brought into question except for the purpose of fixing the amounts for the ensuing five years.
- Any review under this Article shall take into account the financial position of the Federal Government, as well as the needs of the States or State concerned, but (subject to that) shall endeavour to ensure that the State revenue is adequate to meet the cost of State services as they exist at the time of the review, with such provision for their expansion as appears reasonable.
- The period for which provision is to be made on a review shall be a period of five years or (except in the case of the first review) such longer period as may be agreed between the Federation and the States or State concerned; but any order under Clause (1) giving effect to the results of a review shall continue in force after the end of that period, except in so far as it is superseded by a further order under that Clause.
- A review under this Article shall not take place earlier than is reasonably necessary to secure that effect can be given to the results of the review from the end of the year 1968 or, in the case of a second or subsequent review, from the end of the period provided for by the preceding review; but, subject to that, reviews shall be held as regards both the States of Sabah and Sarawak for periods beginning with the year 1969 and with the year 1974, and thereafter as regards either of them at such time (during or after the period provided for on the preceding review) as the Government of the Federation or of the State may require.
- If on the occasion of any review under this Article the Government of the Federation gives notice to the States or State concerned of their intention to vary any of the assignments of revenue under Part V of the Tenth Schedule (including any substituted or additional assignment made by virtue of this Clause), or to vary Clause (4) of Article 112C, the review shall take the variation into account, and provision shall be made by order of the Yang di-Pertuan Agong so as to give effect to the variation from the beginning of the period provided for on the review:Provided that this Clause shall not apply to the assignments under sections 4, 7 and 8, and shall not apply to that under section 5 or 6 until the second review.
- If on any review the Federal Government and the Government of a State are unable to reach agreement on any matter, it shall be referred to an independent assessor, and his recommendations thereon shall be binding on the governments concerned and shall be given effect as if they were the agreement of those governments.
- Clause (4) of Article 108 shall not apply to require the Federal Government to consult the National Finance Council in respect of matters arising under this Article.
- Any order of the Yang di-Pertuan Agong under this Article shall be laid before each House of Parliament.