Budget 2027: The Overlooked Tax Reform

While spending and debt dominate the headlines, the changes to Malaysia’s tax system may prove just as consequential for growth, investment and fiscal sustainability.

The debate over Budget 2027 has largely revolved around the RM459.8 billion federal expenditure figure, government borrowing, rising national debt and expanded cash assistance. These are important issues, particularly as the government pursues fiscal consolidation. Yet the concentration on expenditure risks overlooking another crucial dimension of the budget and that is tax policy.

The Ministry of Finance has two principal fiscal instruments to influence economic activity—government spending and taxation. Spending can stimulate demand through public investment, procurement, wages and assistance. Taxation works through a different channel, influencing disposable income, consumption, business cash flow, investment decisions and the government’s capacity to finance public commitments.

When fiscal consolidation limits the scope for additional spending, tax policy becomes even more consequential. The government must balance the need to mobilise revenue against the risk of suppressing household purchasing power and private-sector investment. It must also ensure that the burden is distributed fairly and that economic activity which escapes effective taxation is brought into the revenue system.

This is why Budget 2027’s tax measures deserve closer scrutiny. 

RM600 Million MRT Refurbishment: Who Will Answer for the Missing Trains?

The controversy over seven MRT Kajang Line train sets sitting with SMH Rail is being framed primarily as a contractor's failure to return trains on time. That is certainly a legitimate question. But it is not the only one.

More importantly, it is a question that Transport Minister Anthony Loke should answer.

A close to RM600 million Maintenance, Repair and Overhaul (MRO) programme was awarded to SMH Rail in 2024 to refurbish all 58 train sets operating on the MRT Kajang Line. More than two years later, seven remain with the contractor.

Scoop reported that none of the seven had been returned to Rapid Rail when it published its report, while only 38 of the 58 sets were fully serviceable after accounting for trains undergoing overhaul, those awaiting spare parts and three unavailable because of accidents. 

It also reported that MRT Corp had granted SMH Rail two extensions of time. (scoop.my)

New minimum wage: Political suicide or calculated risk?

A minimum wage is more than a number on a payslip. It is a deliberate intervention in the labour market—a legal floor intended to protect workers from excessively low wages, improve purchasing power and reduce wage inequality.

But intervention comes with trade-offs. Raise the floor too little and it may have little impact on living standards. Raise it too quickly and employers may respond through higher prices, lower margins, reduced hiring, shorter working hours or greater automation.

The proposed increase from RM1,700 to RM2,000 therefore deserves to be examined beyond whether workers deserve another RM300. It raises a bigger question of whether the government is deliberately trying to forcing Malaysia away from its low-wage, low-cost business model?

Prime Minister Anwar Ibrahim has signalled that Budget 2027 will contain further measures to boost wages. He has expressed dissatisfaction with Malaysian wage levels and indicated that government intervention may be necessary to push wages higher. 

The argument appears to be broader than protecting the lowest-paid worker. It is about changing the relationship between wages, productivity and corporate performance.

Budget 2027 Must Not Become a Political Casualty

When politics threatens to overshadow the budget

In a recent episode of Keluar Sekejap, Khairy Jamaluddin raised an intriguing possibility: if there were to be a “hacking from the rooftop”, it could conceivably come through the proposed Budget 2027 failing to secure passage in Parliament.

It was a passing observation, rather than the subject of the programme. Yet it raises a question that deserves serious consideration.

If a national budget were to become a casualty of political manoeuvring, it would be deeply unfortunate. Parliament should scrutinise, challenge and improve a Budget. That is its constitutional role. But deliberately preventing a government from having an approved financial plan would be a very different matter.

It would suggest that politics is beginning to lose sight of its fundamental purpose — to administer the country responsibly — and becoming increasingly preoccupied with the pursuit of power.

That is precisely what Malaysia can least afford as Budget 2027 approaches.

Soundbytes I Like to Hear Coming from Budget 2027

There has been much talk about taking Budget 2027 to the ground, listening to different groups and understanding their concerns before the Budget is finalised.

I welcome the sentiment, although consultation with industry, businesses and the public before a Budget is hardly a new practice. Governments have always needed to hear from those who will ultimately be affected by their policies.

What interests me more is what we hear when the Budget is finally delivered.

Budget speeches are inevitably filled with economic terminology. Fiscal consolidation. Productivity. Competitiveness. Targeted subsidies. Structural reform. High-value investment. Human capital. All are important. But most Malaysians are not economists. 

A family is more likely to think about the grocery bill, petrol, rent, school expenses and medical costs. A young graduate is thinking about getting a decent first job. A small trader is thinking about whether there will be enough customers next month. An SME is thinking about wages, electricity, financing, compliance and whether it can remain competitive.

Economic policy may be complicated. The aspiration behind it does not have to be. So, if I were to make a personal wishlist of the soundbytes I would like to hear coming from Budget 2027, these would be among them.

Why Anwar's 52% approval rating does not make PH popular with voters?

 

There is a curious contradiction in Malaysian politics today. A Merdeka Center survey put Prime Minister Anwar Ibrahim's approval rating at 52 per cent — still relatively respectable and the highest among the political leaders tested. 

Yet Pakatan Harapan does not look like a popular political force. Its performance in recent state elections and by-elections has been disappointing, and there is already widespread speculation that PH could face another difficult contest in Melaka.

So how can a Prime Minister remain relatively popular while the coalition behind him appears increasingly vulnerable?

Asking Scott Bessent: Can Malaysia Grow Its Way Out of Debt—and Into Greater Prosperity?

When US Treasury Secretary Scott Bessent was asked about America’s national debt crossing the astonishing US$40 trillion mark, his response was strikingly simple: 

“There’s nothing magic about the $40 trillion number… we can grow our way out of that.” 

He subsequently argued that global economic growth is the way to deal with the mountain of debt. It is an interesting proposition, particularly for Malaysia.

America’s debt has now exceeded 120% of its GDP, while Malaysia’s federal government debt remains below 65% of GDP. The comparison should not be taken too literally because the two economies, currencies, financial markets and debt structures are very different. 

Nevertheless, Bessent’s argument raises a question Malaysia should be asking itself. Can stronger economic growth make the task of managing and eventually reducing our debt burden easier?

The answer is yes—but only partly.