- 9 hours ago
Budget 2027 introduces targeted tax relief, incentives for businesses and adjustments to the tax structure, while maintaining the government's fiscal consolidation agenda. But do these measures move Malaysia closer to a tax system that is fair, competitive and sustainable in the long run? We speak to Harvindar Singh, Council Member of the Chartered Tax Institute of Malaysia, on the policy choices shaping the nation's revenue future.
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00:00Before Budget 2027 was stable, tax practitioners were closely watching several key areas from SST reform and tax-compliant measures
00:07to investment incentives and support for middle-income households.
00:11And now that the measures have been announced, the question is whether Budget 2027 merely offers immediate tax relief
00:17or whether it takes meaningful steps towards a more sustainable, competitive and future-ready tax system.
00:22So joining us to share his assessment is Havindar Singh, Council Member of the Chartered Tax Institute of Malaysia.
00:28Good morning. How are you?
00:29Very good. Thank you.
00:30I hope you all thank you for taking the time to speak with us this morning.
00:33Now that Budget 2027 has been tabled last Friday, I've seen that you've outlined several areas that you believe to
00:40be closely watched,
00:41including SST reforms, like I mentioned earlier, tax enforcement and so on compliance and sort of that.
00:46So having now seen the full package of measures announced by the government on the Budget 2027,
00:53which one that broadly meet your expectations from a tax policy perspective and what stood out most to you?
00:59Whether positively and also negatively?
01:01Thank you firstly for this opportunity to share my thoughts.
01:05I think to a very large extent, what we've seen in Budget 2027 is pretty much what was expected.
01:13The quantum of the budget itself, it's higher than ever, bearing in mind, of course, that we are looking at
01:20the elections coming up pretty soon.
01:23I think the government has taken into account the cost factors, the cost of doing business issues that are faced
01:33by MSMEs and some of the measures that have been put in.
01:37We've got the wage increase to 2,000.
01:41It doesn't affect MSMEs that are having less than 50 million turnover.
01:47There's a reduction of the tax rates for the MSMEs as well.
01:51There is a bit of a shift from, I suppose, to support the middle-income earners.
01:59There are tax reliefs that have been introduced to be compensated by some additional taxes to be borne by the
02:07upper-income segment.
02:09As far as GST was concerned, I think all of us were pretty sure that there will not really be
02:17any reintroduction or measures pertaining to GST coming up at this point in time.
02:22There was no mention of any kind of improvement or improvisation of the SST as well, but it is probably
02:31something that will happen, you know, post-budget.
02:36So, to a large extent, I think, and I think the budget has given something for practically everyone.
02:42If you talk about early education, if you talk about the aged care, if you talk about looking at environmental
02:50protection, ESG measures.
02:52So, there is a little bit of everything for everyone.
02:56I would say that somebody asked me this previously as well at another session.
03:02Out of five, what would my rating be?
03:04I would say probably a high fall as far as the performance of the government in tabling a budget that
03:12I think is quite strategic.
03:15It is, although we call it probably an election budget, but normally you'll find that with election budgets, there is
03:21unbridled spending.
03:23But it is being counter-measured by the need to lower the deficits as well to 3.3 next year.
03:31So, I think it is very responsibly formulated and shared with the rakyat.
03:39So, we see a lot of good announcements and a little bit of everything, like I mentioned earlier, from the
03:44biggest thing to the smallest thing,
03:46like some incentive tax relief for pet owners as well.
03:49That's right.
03:49That's interesting.
03:50So, let's now unpack some of the measures in greater detail starting with the government's effort to actually balance the
03:56tax relief and fiscal sustainability.
03:58So, let's look at the budget 2027 as a whole.
04:01Do the measures announced suggest Malaysia is moving towards a more sustainable and resilient tax system?
04:07Or are they largely short-term responses to current economy and cost of living pressures right now?
04:13I think it's a combination of both.
04:15If you talk about the middle-income earners, the sandwich generation that has been described as one that has to
04:21take care of the kids as well as the parents,
04:24that face the high cost of, you know, talk about education and living in urban areas.
04:31There are measures to assist them, but I would say that these are short-term living cost reliefs.
04:38At the same time, you know, there's a need to increase the lifestyles of the living, the income of the
04:52riot.
04:53And so, it's inching towards that, because I think by 2030, the idea is to have a minimum wage of
04:593,000.
05:00So, there are measures that are put in to try to manage that as well.
05:04You know, whilst at the same time being mindful of, you know, the previously when there was an increase from
05:101,005 to 1,007,
05:13there was a lot of hue and cry, especially amongst the smaller MSMEs,
05:18that this is going to really cost them a lot to, you know, to manage as far as with other
05:24rising costs of doing business.
05:26So, it's a very tricky thing to manage, because what actually it means, in a way,
05:33is that we've got like two levels of salaries or wages,
05:42which really means that if I was one of those that is not getting a salary increase,
05:47and my counterpart in a bigger firm is getting that increase,
05:51it's surely going to push up the, you know, inflation will come in,
05:55and my purchasing power will be reduced.
05:59So, it's actually quite, I think, the balance has been struck in how to manage this.
06:06It may also give rise to loss of talent or talent flight from smaller firms to bigger firms that are
06:14offering higher salaries.
06:17Now, the 300 ringgit may not really mean very much to many people,
06:23but when you are earning about 1,005 or 1,008 or 2,000,
06:27that additional 300 ringgit actually can go quite a long way towards meeting some of your basic needs,
06:33cost of groceries and telephone bills and, you know, the like.
06:38So, it is actually with the idea of upscaling levels of income,
06:48there's a need to push for this.
06:50So, I think what the government is doing is putting in the first steps to get there
06:55and being mindful of not wanting to overburden MSMEs as well,
07:01plus giving them a tax reduction for the first, you know, $150,000.
07:08Previously, it has 15%, now it's at 14%.
07:12And for the income up to $450,000, it's at 16%, where previously it was 17%.
07:20This gives rise to, I think, taxes, reduction of taxes of savings of about 6,000 ringgit.
07:28Whether that is actually meaningful or not, I suppose it could be, you know,
07:33argued till the cows come home.
07:36But I think, in a way, maybe some grants or some digital, you know,
07:46there's also a need for certain, in terms of compliance, enhancing compliance,
07:54this affects non-MSMEs, that any salaries that are paid need to be basically
08:00through the banking system, is to increase, enhance compliance as well as transparency.
08:09So, like I said, I think the budget is looking at a few angles.
08:13We are not introducing additional taxes.
08:15We need to raise additional revenue.
08:17We need to tighten up compliance.
08:21Wages can be probably the biggest, you know, expense item in many organisations.
08:28And so, it must be something that is transparent.
08:31Because nowadays, we have audits where, if you talk about contractors making payments
08:35to foreign workers, there are no proper details.
08:40It always becomes an issue.
08:41Making it transparent now.
08:42Just making it more transparent.
08:44So, it's, I think, pretty well thought out in that sense.
08:47We are not just looking at the current situation.
08:54We are looking at putting in the stepping stones for better enforcement in time to come.
09:01Hopefully, these measures will eventually be there for MSMEs as well,
09:09once they perhaps are in a better position to manage this additional cost,
09:15like increased wages and the need to use the banking systems
09:20for payments of wages and salaries.
09:22All right.
09:23Okay.
09:23That's an interesting perspective.
09:25But I want to look at the different aspects now.
09:27Because the government now is lowering the threshold for the 30% marginal tax
09:30from RM2 million to RM1 million in chargeable income.
09:33Is this a necessary step towards a progressive tax system?
09:38Or it could actually affect Malaysia's ability to attract and retain high-skilled talent?
09:43Entrepreneurs, for example.
09:45And that's one.
09:46The other thing is Budget 27 also increases the personal income tax relief
09:50and also expands relief categories.
09:53So, from your perspective, Mr. Harvinder,
09:55how should governments determine whether a broad-based tax relief remains the best approach
09:59compared with more targeted support for the households under the greatest financial budget?
10:04So, between these two, how could I actually explain?
10:07I think the, you know, to increase the tax rate to 30%
10:12for chargeable income of RM1 million and above.
10:16I think it's fair in terms of wealth redistribution
10:20and, you know, placing a larger fiscal responsibility
10:24on top-tier earners to offset the relief that has been given lower down
10:29for the M40 sort of taxpayers.
10:35I think there's a loss of revenue of about RM3 billion over there,
10:39which could be compensated somewhat with this increased taxes for the higher income earners.
10:47And actually at 30%, Malaysia, I think, remains structurally quite competitive
10:52against countries in the region, if you talk about Thailand, Indonesia,
10:56where typically I think it's at about 35% the taxes that are there for personal tax.
11:02Of course, we are higher than Singapore,
11:06but Singapore is a different animal altogether.
11:09It's a small city-state which is easy to manage.
11:12So, it could potentially, in a way, act as a minor deterrent
11:16for hyper-mobile, highly skilled, executive talent and local wealth builders,
11:22you know, the fact that it's going to be at a higher rate.
11:24But having said that, I think we also have this incentive called Global Services Hub
11:31where Malaysia wants to try to be a hub for services to be provided to the region
11:38and to attract talent or foreign citizens, there's a flat tax rate of 15%,
11:46provided, of course, the salary of this foreign talent is at about 35,000,
11:51a minimum of 35,000.
11:53So, there are countermeasures, I think, to sort of attract talent
11:59and try to retain talent in Malaysia as well.
12:02So, in that perspective, yes.
12:07The increase of the personal relief from 9,000 to 12,000,
12:11it has been a long time coming because since 2010
12:15and so it's a pleasant surprise that it's coming this year.
12:19I think we've had some very meaningful reliefs announced this year,
12:24you know, care for the aged parents or grandparents and AI-related cost.
12:31In the past, the last few years, it's been pretty obscure because, like, last year, for example,
12:35I was wondering who actually is going to benefit from that incentive or the relief
12:39where if you were to purchase, you know, some machines to do, you know,
12:46to turn your food waste at home, domestic food waste into compost
12:49or to food grinding machines, I know it's to do something with environmental protection,
12:57but how many people are actually really going to be able to benefit from that?
13:00So, this year, I think there's been quite a wide, you know,
13:05array of reliefs that have been brought in which will apply to taxpayers across the board.
13:14So, it is actually, I think, part of the measures to try to help reduce the cost of, you know,
13:24living to help the riot.
13:27And as far as attracting investments into the country is concerned,
13:33we've got, for a very long time, we've had tax incentives that are given in a sort of a blanket
13:39manner,
13:41by any status, blanket exemptions.
13:43It's served its purpose in the past, but on a moving forward basis,
13:47the government is looking at moving up the value chain.
13:52And if you talk about, you know, attracting investments to some sort of tax incentives,
13:59it is based on outcome, outcome-based incentives,
14:02which means you'll get a lower tax rate or an allowance against your capital expenditure
14:09that you incur, investment tax allowance.
14:10But it is given on the basis that you deliver what some performance criteria that is there.
14:21For example, maybe a certain amount of local content for manufacturers,
14:25getting local employees, getting local vendors on board,
14:31and meeting certain metrics in that manner.
14:35And if you qualify, if you, you know, basically fulfill those conditions,
14:40then you are able to basically get those incentives.
14:44So that is actually the way the new incentive framework has been designed, has been formulated,
14:50which is, I believe, you know, for every tax ringgit that is foregone,
14:59we want to measure what is the type of benefit that we're getting.
15:03How does it help in terms of, you know, spiralling the economic activity?
15:09How does it help with increasing the wealth of the nation?
15:16And so along those lines.
15:18Ms. Avinder, we have about one minute left,
15:19but I still have one last question to ask you.
15:22Just briefly, if you could tell us,
15:23what could be the risk if we're continuously expanding reliefs
15:26that could gradually narrow the tax base
15:29and affect long-term revenue sustainability?
15:31And what will happen as well if we delay this reform?
15:35Well, actually, I think the idea of these reliefs
15:39is always to try to encourage a certain type of spending.
15:45If we talk about AI, it is so that we can upskill ourselves.
15:49We do not feel...
15:51Everybody talks about AI is taking over everything.
15:54So what are we doing about it?
15:55I have one question about AI, actually, but we just...
15:57No, that's fine.
15:58Enough time for that.
15:58That's fine, that's fine.
15:59So I think there is a tax foregone by giving these reliefs.
16:06If you talk about the incentives,
16:08like green incentives that are being given as well,
16:11the question could be that, you know,
16:13there are ESG mandates around the world,
16:16so Malaysia, the companies will have to follow this.
16:19Why do we need to give incentives?
16:21I think the idea is to help give a soft lending to businesses
16:26so that the government shows the support,
16:28that you are taking these measures into account and you are investing accordingly.
16:36We are serious about sustainability.
16:38We are serious about wanting to leave a better planet for our future generations as well.
16:47So there is a lot of thought, I think, that has been put into it.
16:53So there is a need, of course, to increase tax collections.
16:57And I think e-invoicing, right now, there is an increased threshold for exemption.
17:05I think it has become, unfortunately, a bit of a political tool by certain parties.
17:10But e-invoicing is so crucial, so important for us to be able to increase, you know, tax collections
17:16because ultimately it's about getting, otherwise it's the same suspects that are, you know,
17:22the usual suspects that are being taxes and more taxes that are in the system.
17:25I think data shows that we've had about 52,000 over additional taxpayers that have come on board
17:34which probably otherwise would not have if not for e-invoicing.
17:37And that gave rise to additional collections of about 4 billion in the early stages of implementation.
17:44So you can imagine if it's fully implemented, you know.
17:46So there are certain things that have already been put in place that perhaps can be enhanced.
17:55All right.
17:56And with that, hopefully, we can counter the loss of revenue by giving all these reliefs with increased tax collections.
18:03Amazing.
18:04So after all, Budget 2017 may offer immediate tax relief and targeted incentives.
18:08But as we discussed, Mr. Avinda, the broader question is whether these measures are actually laying the foundations
18:13for a tax system that are actually fair, competitive and sustainable in the years ahead.
18:18So ultimately, the success of any tax measure will not be judged solely by how much relief it provides today
18:23but whether it strengthens Malaysia's long-term economic and fiscal resilience.
18:27So that was Harvinder Singh, the council member of Chartered Tax Institute of Malaysia.
18:32Thank you so much, Mr. Avinda, for taking the time to speak with us this morning.
18:35And you can find this whole discussion on all of our social media platforms and that includes astrawani.com.
18:39We'll go for a short break. We'll be right back.