Budget 2027 tax measures could return RM8b to taxpayers, says economist
PETALING JAYA: Malaysia’s fiscal deficit is projected to narrow to 3.3% of gross domestic product (GDP) next year, putting the government on track towards its 3% target by 2028 as the economy continues to expand.
Under Budget 2027, the deficit is expected to decline to RM77.5 billion from RM78.5 billion this year, while the debt-to-GDP ratio is projected to ease to 63.7% from 65.2% in 2025.
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Economist Dr Geoffrey Williams, founder and director of Williams Business Consultancy Sdn Bhd, said stronger GDP growth could help improve the country’s fiscal ratios even as government debt continued to rise.
He said the government’s approach was to set targets for debt and fiscal deficit ratios and work towards meeting them.
“Often this is achieved because GDP rises faster than the debt, so the ratio falls even if the debt still rises.
“Fiscal consolidation, in terms of the debt and deficit ratios to GDP, is really due to higher GDP rather than lower borrowing,” he told theSun.
According to the Finance Ministry’s 2027 Fiscal Outlook, the deficit is projected to decline by RM992 million, or 1.3%, in absolute terms next year.
Budget 2027 also offers tax relief to middle-income earners, raising individual tax relief from RM9,000 to RM12,000 and cutting income tax rates by one percentage point for chargeable income between RM70,001 and RM150,000.
The measures are expected to benefit about five million M40 taxpayers, with savings of up to RM1,600 a year.
Williams said the measures could put RM8 billion, or 0.4% of GDP, back into taxpayers’ pockets, equivalent to about RM130 a month on average.
However, the impact on household spending would depend on whether taxpayers felt the benefits.
He said tax relief, unlike direct cash assistance, would only be claimed when taxpayers filed their returns at the end of the year, meaning the benefits might not be immediately felt.
“So, it is a significant injection potentially. Whether people notice it is another question.”
Taxpayers needed to “see it in their wallets or cash in hand” and “know they’re better off and spend it”. Otherwise, it would not necessarily change their behaviour, he said.
Williams also said the increase in the minimum wage from RM1,700 to RM2,000 could help raise workers’ incomes, although the delay until June 2027 might not be well received by some.
He also cited Parti Bersama Malaysia’s shadow budget, unveiled before Budget 2027 was tabled on Oct 10, which proposes fiscal reforms to free up funds for social spending and boost incomes.
Williams backed its target of achieving a budget surplus by 2035, calling it “a very sound approach”.
He said both the government and Bersama supported raising the minimum wage, while Bersama would also extend the Progressive Wage Policy to 2.5 million people, a move he describes as “transformative”.