04/05/2026

MONDAY | MAY 4, 2026

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Wealth tax proposal draws mixed views

Malaysia’s fiscal position, but economists warn that poorly timed or poorly communicated reforms risk sparking public backlash at a time when lower-income households are already under mounting financial strain. Universiti Teknologi Mara senior lecturer in economics Dr Mohamad Idham Md Razak said subsidy rationalisation remains one of the most immediate fiscal tools available to the government, but carries significant political and social risks if not carefully managed. “Subsidy rationalisation can be positioned as improving efficiency and reducing leakages, especially if shifted towards targeted support. “However, any immediate increase in prices without clear and visible compensatory measures may lead to dissatisfaction, particularly among vulnerable groups,” he said. The government has been exploring subsidy reforms as part of broader efforts to rein in spending, with the policy frequently cited as a key fiscal lever amid tightening budget conditions. However, the debate comes against a backdrop of mounting household stress. Consumer Credit Oversight Board Task Force findings last year showed that more than 70% of active buy now, pay later (BNPL) users in Malaysia are from the lower-income B40 group. Outstanding BNPL debt reached RM4.9 billion as at end-2025, underscoring growing reliance on short-term credit to manage daily expenses. Against this backdrop, Dr Mohamad Idham said policymakers must be cautious in sequencing reforms. “While a wealth tax may contribute to longer-term redistribution, it does not directly alleviate short-term financial stress faced by households. “Therefore, the focus should remain on targeted subsidies, PETALING JAYA: A proposal to impose a 2% wealth tax on Malaysia’s richest individuals has triggered a fresh debate among economists and policy analysts with questions raised over its feasibility, effectiveness and potential impact on investor sentiment. The call, made by former Klang MP Charles Santiago recently, comes as the government seeks to rein in spending amid fiscal pressures including proposed cuts across several ministries. While the idea has gained traction on grounds of equity, experts caution that translating it into a workable policy is far from o Economists divided over feasibility, effectiveness, revenue potential and investor implications Ű BY HARITH KAMAL newsdesk@thesundaily.com

1% would raise RM28 billion, as electronic payments now represent more than 80% of transactions,” he said, adding that traditional tax mechanisms may be reaching their limits. He also highlighted missed opportunities in subsidy reform. “Subsidy rationalisation was on course to save more than RM20 billion but unfortunately this has stalled. “This could have been used to cut taxes for middle-income groups or even to give more support,” he said. Williams added that the debate reflects a broader weakness in Malaysia’s fiscal policy discourse. “Unfortunately there is no grown up discussion of tax reform in Malaysia because of the groundhog day debate on SST versus GST,” he said. While the wealth tax proposal may continue to draw attention amid concerns over inequality and fiscal strain, analysts said significant economic, administrative and political hurdles remain before such a policy could be realistically implemented. multi-organ failure. In a separate case in Seremban, a two-year-old boy was believed to have been left in a car after his mother forgot to drop him off at a babysitter before going to work on Jan 27. Seremban district police chief ACP Azahar Abdul Rahim said the child was found unconscious at about 6.15pm and was pronounced dead at the scene by medical personnel from Tuanku Ja’afar Hospital. The ministry noted that both deaths occurred when weather conditions were under Level 1 alert. “The main risk factors identified were exposure to extreme heat in an enclosed environment and prolonged strenuous physical activity, leading to severe dehydration and failure of the body’s temperature regulation,” it said. Amid rising concerns, the ministry advised the public to limit outdoor physical activities and avoid prolonged exposure to hot weather. Those required to work outdoors should take frequent breaks in shaded areas to cool down, while the public is urged to drink plenty of water even when not thirsty. “Use protective measures such as hats, umbrellas and light-coloured, lightweight clothing,” it said. The ministry added that prevention must also extend to household and caregiving practices. “Ensure high-risk groups such as infants, children, the elderly and individuals with chronic illnesses receive adequate hydration and are closely monitored. Do not leave children unattended in vehicles. Seek immediate medical attention if symptoms such as dizziness, nausea, muscle cramps or extreme fatigue occur.” It also urged government agencies, educational institutions and care centres to take appropriate precautions when planning and conducting outdoor activities to reduce the risk of heat related illnesses.

PETALING JAYA: Malaysia’s intensifying heat is turning deadly with 56 heat related illness cases and two fatalities recorded this year, most triggered by physical activity under punishing temperatures, the Health Ministry said. In its latest update yesterday, the ministry said cases reported nationwide from Jan 1 to May 3 comprised 47 instances of heat exhaustion, four exertional (activity related) heatstroke cases, four non exertional heatstroke cases and one case of heat cramps. The latest tally marks an increase from the 41 cumulative cases reported by Health Minister Datuk Seri Dr Dzulkefly Ahmad on April 25. The ministry said analysis showed that 58% of the cases were associated with physical activity in hot weather. “Of that number, almost half involved sports and athletic activities such as cross-country runs, sports training and marathons while the rest involved high-intensity physical training by security forces and operations personnel,” it said. Several areas in Kedah, Kelantan and Sabah are currently under Level 1 alert or the watch level based on the Malaysian Meteorological Department’s hot weather status issued at 6am yesterday. “These areas recorded maximum daily temperatures of between 35°C and 37°C for at least three consecutive days,” it said. The ministry also confirmed two heatstroke deaths this year — a two year-old child left in a vehicle and a 42-year-old man who took part in a 30km marathon in Penang on April 25. The Penang victim reportedly collapsed near the finish line and was taken to Penang Hospital in critical condition before being admitted to the intensive care unit. He died at 2.08am on April 26, with the cause of death confirmed as heatstroke with rhabdomyolysis and would be to reduce broad-based subsidies and replace them with targeted assistance. “General subsidies distort prices, weaken fiscal discipline and encourage inefficient consumption. A wealth tax would add a new distortion on top of existing distortions,” he said, adding that Malaysia should instead prioritise institutional reform and greater market competition. However, economist Prof Dr Geoffrey Williams offered a more measured view, saying the proposal is not without merit at least in principle, although difficult in practice. Still, he cautioned that turning such estimates into actual revenue would be far from simple. “It is a tax on total wealth which includes property and businesses, not just financial or cash assets. So, it is not so easy to tax those assets quickly,” he said. Williams suggested that broader tax reform may offer more practical alternatives, pointing to Malaysia’s expanding digital economy. “An electronic payments tax of just Ű BY FAIZ RUZMAN newsdesk@thesundaily.com

small. It is a recurring penalty on capital formation and it would likely encourage capital flight, tax planning, asset relocation and weaker long term investment sentiment.” Ferlito also pointed to international experience, noting that several European countries had abandoned wealth taxes due to weak revenue yields and administrative difficulties. “Malaysia would face the same problems, probably in a more acute form because of its openness and regional competition for investment.” While acknowledging that some wealth accumulation in Malaysia may be linked to state-backed systems, he argued that the solution lies in structural reform rather than new taxes. “If wealth was accumulated through government contracts, subsidies, monopolies or protected concessions, then the solution is not to introduce another tax. “The solution is to dismantle the unhealthy apparatus that allowed such privilege to emerge,” he said. On subsidy rationalisation, Ferlito said a more sustainable approach

straightforward. Centre for Market Education chief executive officer and economist Carmelo Ferlito is blunt in his assessment, questioning why such proposals continue to gain traction. “I am surprised such ideas are still seriously circulating. A wealth tax may sound attractive politically but economically it is one of the least efficient ways to address fiscal pressure,” he said. Ferlito argued that taxing accumulated wealth raises deeper structural and moral questions about the role of the state. “Wealth, when created through entrepreneurship, investment, risk taking and innovation, is not a social problem to be punished. “The deep moral issue with wealth tax is precisely this: how can the state punish someone simply for owning something? Taxing income or consumption is one thing; taxing the mere existence of accumulated assets is much more problematic,” he said. He added that a 2% annual levy would amount to a recurring drag on capital formation. “A 2% annual tax on wealth is not

‘Subsidy reforms timely but risky’ PETALING JAYA: Subsidy rationalisation could bolster

Heat-related cases climb, two dead

Mohamad Idham said subsidy rationalisation carries significant political and social risks if not carefully managed. – ADAM AMIR HAMZAH/THESUN

redirected to ease pressure on households or strengthen social protection measures. At the same time, Williams said Malaysia needs a broader rethink of its fiscal framework, arguing that both revenue constraints and structural inefficiencies must be addressed together rather than in isolation. Dr Mohamad Idham echoed this view, saying the country’s fiscal challenges cannot be resolved through a single policy instrument. “Malaysia currently faces both a revenue constraint and a spending efficiency issue. Addressing only one side would be insufficient. A balanced approach that improves revenue, reduces waste and better targets spending is needed for long term stability.” – By Harith Kamal

income support and financial resilience measures, while gradually introducing structural reforms.” He stressed that the success of subsidy rationalisation would depend heavily on timing, communication and credibility. “A gradual approach, supported by targeted assistance and clear policy messaging, is critical to maintaining public trust and ensuring acceptance of reforms,” he said. Economist Prof Dr Geoffrey Williams said subsidy rationalisation remains one of the most effective tools available to strengthen Malaysia’s fiscal position but warned that reform momentum has stalled despite its potential impact. He added that projected savings from rationalisation could be