13/10/2025

BIZ & FINANCE MONDAY | OCT 13, 2025

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Malaysian Paper

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BUDGET 2026 is a game changer because the government has chosen to fund its expenditure with minimal increases in taxes, and the increases has been confined to foreigners, reducing pollution and minimising the carbon footprint, and discouraging damage to our health. Generally, the rakyat has not been burdened with any new taxes. In 2026, the total expenditure of the Budget will be about RM419 billion versus RM412 billion in 2025 with an expected budget deficit of 3.5% amounting to RM74.5 billion. The operating expenditure that will be largely spent on emoluments, debt service charges, subsidies, retirement charges, etc, will amount to RM338 billion, and the development expenditure will be RM81 billion. Government’s direction In Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim’s words: “This government chose to improve governance in imple menting targeted subsidies without adding burden to the people. This approach has enabled us to combat corruption, curb smuggling and dismantle cartels. “We have chosen the long, difficult, and winding road – that of reform, strict fiscal discipline and institutional strengthening, because only this path can ensure the country benefits in the long term.” Where is the self-funding coming from? The biggest component will be from the subsidy reduction of diesel and RON95 petrol totalling RM7.5 billion, together with the restructuring of electricity tariffs which will add another RM6 billion. Floating chicken and egg prices will provide further savings of RM2 billion. The second component will be from the introduction of additional taxes. Carbon tax will be imposed for PETALING JAYA: Banks approve of Budget 2026’s fiscal discipline and the government’s deficit target of 3.5% of gross domestic product (GDP) by next year, calling it a necessary foundation for long-term stability. Across the board, the banks also praised the government’s continued push for Islamic finance; environ mental, social and governance adoption; and digital transformation. Malayan Banking Bhd (Maybank) president and group CEO and The Association of Banks in Malaysia chairman Datuk Seri Khairussaleh Ramli applauded the government’s broad-based approach, striking a balance between delivering invest ment stimulus, growth of new economic sectors and social relief while maintaining balance fiscal discipline in which it is on track to meet the Fiscal Responsibility Act’s medium-term target budget deficit of 3% of GDP. He said Maybank fully supports the government’s direction on cross border economic leadership, particularly on the development of the Johor-Singapore Special Eco nomic Zone (JS-SEZ), which streng thens Johor’s position as Malaysia’s strategic gateway. “As an early mover, Maybank has mobilised RM8 billion in terms of Ű BY HAYATUN RAZAK sunbiz@thesundaily.com

Malaysia charts new course with self-funded Budget 2026

inflows of foreign money with minimal costs. Domestic tourism has also been promoted to increase domestic demand through a tax relief of RM1,000 on the admission to local tourism centres and cultural pro grammes. The RM15 billion that will be distributed through Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah in 2026 will have a multiplier effect on the economy which will result in businesses supplying these segments of the population paying extra income taxes and collecting extra Sales and Service Tax. The extension of tax exemption for foreign-sourced dividend income and capital gains for companies, LLP, trust bodies, cooperatives to 2030 will bring back funds into Malaysia. Unit trust will enjoy a similar extension on their exemption on their foreign sourced income until 2030. As the saying goes, “There is no gain without pain”. The government needs to increase tax collection to fund the Budget. The 2026 budget for the Inland Revenue Board (IRB) has been increased to RM187 billion from RM177 billion, and Royal Malaysian Customs Department’s budget has been increased to RM83 billion from RM76 billion. Bearing in mind that no significant new taxes have been introduced, you should expect greater vigilance by both authorities.

three industries, – iron, steel and energy – which is intended to assist in meeting the zero-carbon target by 2050.

The 2% excess dividend tax introduced last year for individuals receiving dividends from com panies in excess of RM100,000 will now be extended to partners of limited liability part nerships (LLP) who re ceive distributions in excess of

RM100,000 annually. To discourage smoking and alcohol consumption, excise duty on alcohol and tobacco products will be increased. Stamp duty will be doubled from 4% to 8% for any transfer of residential properties to foreign individuals and companies. This will not affect permanent residents. Some tax incentives have been reviewed and, in certain cases, reduced to align with the outcome based approach rather than the blanket approach. There are many incentives given to the tourism industry to attract tourists as part of the Visit Malaysia 2026 initiative. Incentives have been given to tour operators, organisers of international conferences, trade exhibitions and international arts, cultural, tourism, sports and recreational events. Attracting foreign tourists will bring in significant

The restructuring of electricity tariffs will add RM6 billion to the government’s coffers. – BERNAMAPIC

This simply means that there will be increased frequency of audits and the intensity of checking on the level of compliance will also be increased. It can be anticipated that higher penalties can be expected for cases involving aggressive tax avoidance, fraud, evasion, and negligence. Anyone involved in corruption, smuggling, or counterfeiting will be severely dealt with through increased penalties and perhaps enforcement through the courts. In this environment, taxpayers must pay much greater attention to compliance. However, you can also expect more disputes with the authorities since tax laws are always deficit target and RM81 billion development expenditure is a decisive step towards fiscal sustain ability. The bank lauded new revenue measures and efficiency reforms as positive for Malaysia’s sovereign credit standing. “The fiscal deficit is expected to further narrow to RM75 billion or 3.5% of GDP next year, from RM77 billion or 3.8% of GDP in 2025, bringing us closer to the below 3% target under the 13MP. This is certainly a move in the right direction and will be positive for Malaysia’s sovereign rating, currently stands at A- by S&P Global Ratings and A3 by Moody’s Investor Service, both with a stable outlook.” AmBank Group CEO Jamie Ling praised Budget 2026’s focus on high growth, high-value sectors including semiconductors, renewable energy and AI-driven MSMEs. “These policies are paramount in positioning the economy to reach an RM2 trillion target by 2030.” OCBC Malaysia CEO Tan Chor Sen and Standard Chartered Malaysia CEO Mak Joon Nien both welcomed Malaysia’s cross-border ambitions through the Asean Power Grid and the JS-SEZ. “Budget 2026’s focus on the JS SEZ, Asean Power Grid and Asean Business Entity reinforces Malaysia’s strategic role as a regional connector. We are ready to support cross-border growth,” said Tan.

subject to multiple interpretations. In the course of improving governance in administering the tax system, it is extremely important that the tax authorities are mindful of the taxpayer’s rights. Finally, the announcement by the prime minister that he will be expediting tax refunds is extremely welcome as taxpayers are facing cash flow problems in the current turbulent world economy. This article is contributed by Thannees Tax ConsultingServices Sdn Bhd managing director SM Thanneermalai (www.thannees.com). Mak said, “Deeply rooted in Asean, we at Standard Chartered are encouraged by the continued progress in cross-border investment zones.” He added that Budget 2026 strikes a careful balance between today and tomorrow. “The government’s decision to maintain fiscal discipline while investing in the right pillars will define Malaysia’s long-term competitive ness.” Agrobank CEO Datuk Tengku Ahmad Badli Shah commended the government’s RM1.1 billion allocation for agropreneurs, saying Budget 2026 embodies hope and opportunity for farming communities and streng thens national food security. “Budget 2026 has allocated RM1.1 billion for Agrobank to support agropreneurs in expanding their operations while advancing auto mation and mechanisation. This substantial funding will not only empower industry players but also boost productivity and ensure the agricultural sector as a pillar of national food security,“ he said. In conclusion, as Malaysia targets 4% to 4.5% GDP growth in 2026, the banking industry stands ready to mobilise financing and partnerships to advance the Budget’s ambitions, from green transition and SME em powerment to cross-border economic leadership.

Banks applaud fiscal discipline, deficit target of 3.5% by next year

financing and invest ments in the JS-SEZ and helped esta blished two Single Family Offices (SFO) with 11 more in the pipeline,” Khairu ssaleh said. CIMB Group CEO Novan Amirudin commended the

spending. “Firm focus on fiscal discipline is demonstrated in the lower deficit target of 3.5% to GDP from the expected 3.8% in 2025.” Tay said savings from subsidy reforms have accorded the govern ment fiscal flexibility to support those in need, a positive for consumer spending and domestic demand. Affin Group CEO Datuk Wan Razly Abdullah praised the Budget’s fiscal reforms, describing them as a continuation of Malaysia’s steady deficit reduction and structural strengthening. “The group is encouraged by government’s commitment towards fiscal consolidation, targeting fiscal deficit to narrow steadily from 4.1% of GDP in 2024 and 3.8% of GDP in 2025 to 3.5% of GDP in 2026, with ongoing reforms in revenue enhancement and prudent expenditure management, to align fiscal strategies but ensure an adaptive approach to development projects that generate long term economic growth.” Hong Leong Bank said the 3.5%

government’s commitment to fiscal discipline, with a target of reducing the fiscal deficit to 3.5% in 2026, a key step towards long term economic resilience. Amid fierce global competition, he said, the government’s move to champion a high-value economy with the introduction of the Asean Business Entity (ABE) status would help Malaysian firms expand re gionally. He also welcomed the JS-SEZ, stating that CIMB has committed RM10 billion in financing to support it. “With facilitation from the Iskandar Malaysia Facilitation Centre, sup ported by the Johor Super Lane and Single-Family Office Incentive Scheme, this effort will continue attracting high-quality investments and talent.” Public Bank CEO Tan Sri Tay Ah Lek said the RM419 billion expenditure bill was a strong statement of intent that balanced subsidy reforms with consumer welfare, calling it positive for domestic demand and household