PETALING JAYA: With Budget 2026 just days away, economists are divided on whether Malaysia should introduce new taxes to raise revenue or hold the line to protect competitiveness and growth.
Economist Dr Geoffrey Williams said Malaysia’s fiscal position remains sound and urged the government to avoid measures that could undermine economic agility.
“Malaysia should aim to be a low-tax country to boost competitiveness regionally. So, no new taxes, greater efficiency and focus on competitiveness, innovation, liberal markets and economic agility is best.”
He added that if new revenue is unavoidable, an e-payments tax (EPT) would be the most effective option.
A 1% levy could raise up to RM28.8 billion annually while a smaller 0.25% charge would still yield RM7.2 billion.
“Introducing an EPT would create a more resilient, broad-based, equitable taxation system with low impact on consumers and businesses,” he said.
But economist T.K.S. Yugendran of Bait Al-Amanah rejected the idea outright, calling it damaging to Malaysia’s digital push.
“I think it is a terrible idea. E-payments already make taxation easier and curb evasion. Tax them, and people would revert to cash, which is harder to monitor and could even fuel money laundering,” he said.
Instead, he expects Putrajaya to adopt a “conservative but expansionary” stance in Budget 2026, one that balances fiscal discipline with support for growth.
“The government is likely to take a cautious approach but still expand spending where needed to sustain industries,” he said, pointing to risks such as global trade tensions triggered by US tariff policies.
He added that public spending should be directed at strengthening fundamentals.
“Putrajaya should focus on food security. Our dependence on imports leaves us exposed to price shocks. The agricultural sector must be modernised,” he said.
Yugendran admitted that new taxes may eventually be unavoidable.
“Taxes always hurt the people, but in the long run we may have no choice if we want to grow the country. Still, I sympathise with the rakyat,” he said.
He noted that Malaysia could no longer rely on petroleum as its fiscal backbone.
“In the 1990s and early 2000s, oil and gas made up between 30% and 40% of government revenue. Today it is less than 20%. As Malaysia grows, the government must increasingly look to private industries that drive most of our income,” he said.
For Williams, the priority should not be raising taxes but creating conditions for income growth.
He argued that keeping Malaysia as a low-tax economy would strengthen its position regionally while allowing businesses and households to thrive.
Both economists agreed that Budget 2026 must walk a tightrope between fiscal discipline and economic resilience, but they remained firmly opposed on whether new taxes should form part of the equation.