KUALA LUMPUR (Oct 18): Tax leaders at the Big Four accounting firms and other tax experts said measures proposed under Budget 2025 would dovetail with the government’s fiscal consolidation plan though more clarity is required.

Presented by Prime Minister Datuk Seri Anwar Ibrahim, the budget would be the third under the Pakatan Harapan–Barisan Nasional coalition government that aims to balance support for a growing economy and rebuilding of government finances.

Here’s what top audit firms and tax experts had to say about Budget 2025:

Tax leader, PwC Malaysia

On the back of positive economic sentiments, evidenced by strong economic growth in recent quarters, manageable inflation rates and a robust ringgit performance against the US dollar, the government is well-positioned to craft sustainable strategies to further fuel the economy in Budget 2025.

Overall, Budget 2025 is forward-thinking, riding on the back of positive economic sentiments, because of its focus on progressive tax measures, the rakyat’s well-being and workforce diversification.

This budget has introduced commendable initiatives aimed at addressing the cost of living for both the B40 and M40 groups, such as the cash handout programmes and numerous personal tax relief enhancements.

For the tax fraternity, Budget 2025 represents a period of consolidation following Budget 2024's introduction of the low-value goods tax, capital gains tax and e-Invoicing, along with the continuation of measures like the global minimum tax. These measures collectively provide a strong foundation for economic resilience, support for families and streamlined tax administration.

Nevertheless, certain measures such as the expansion of sales and service tax (SST), the introduction of carbon tax and mandatory Employees Provident Fund (EPF) contribution for non-citizen workers will require clarity beyond the proposed implementation date to facilitate preparation for these changes.

Malaysia tax leader, Ernst & Young Tax Consultants

Riding the wave of robust growth from 2.9% in the fourth quarter of 2023 to 5.9% in the second quarter of 2024, and with a vision to further invigorate the economy to achieve a leading status in Asia, Budget 2025 has unveiled impactful and targeted measures, charting a course for sustainable prosperity and enhanced competitiveness.

Following the rationalisation of the diesel subsidy, Budget 2025 provides additional clarity on the government’s approach and timeline for addressing the RON95 petrol subsidy. The savings from this exercise will be channelled to public welfare. While rationalisation is fraught with complexities, we commend the government for taking this necessary and urgent action.

Budget 2025 is a testament to the government's decisive policy-making. This expansionary budget reflects a strong commitment to steering the nation towards a sustainable and thriving future by catalysing growth in key sectors, revitalising the economy, and prospering the rakyat. We look forward to the positive outcomes these initiatives will bring to the nation.

Country tax leader, Deloitte Malaysia

Although no new taxes were announced, the government is committed to increasing tax collection in 2025 to RM340 billion, an increase of RM18 billion or 5.6% from 2024. The increase will be partly achieved through measures to widen the scope of SST and tax dividend income on individuals.

At the same time, Budget 2025 has introduced a series of proposals to widen the scope of tax reliefs for individuals, which in turn should reduce the overall tax burden on individual taxpayers. The government has also pre-empted businesses on the introduction of a carbon tax in 2026, which is a welcome move as it gives time for businesses to plan investments in green technologies.

The introduction of the self-assessment system on stamp duty is another move to widen the tax base as well as strengthen compliance. Penalties for non-compliance are expected to be hefty as with any self-assessment system. Businesses should thus take steps to strengthen internal processes and stay abreast with the stamp duty legislation to ensure compliance.

Budget 2025 continues to focus on taxing higher income groups through the tax on dividend income received by individuals exceeding RM100,000, sales tax on premium goods, and service tax on fee-based banking services.

Head of tax at KPMG in Malaysia and President of Chartered Tax Institute Malaysia

The act of widening Malaysia’s tax revenue base through the imposition of a 2% dividend tax on dividend income of over RM100,000 earned by individual shareholders is a unique idea, which is obviously targeted at the top 15% taxpayers without further burdening the other 85%.

Positive outcomes for the benefit of national development can also be expected with the introduction of carbon tax on steel, metal and energy industries come 2026, a phased increase in the excise duty rates on sugary drinks, alongside the progressive broadening of the SST scope and rate coverage.

It is hoped that these tax reforms can be supported with clear regulations, guidelines, and a reasonable transition plan to ensure successful implementation.

The rakyat’s welfare remains a central focus in Budget 2025 with the extension of personal income tax reliefs coupled with broader coverage to include differently abled individuals (OKUs) and senior citizens, increase in minimum wages, higher cash handouts, and a 10-year extension of the tax exemption on foreign-sourced dividend income received by individuals in Malaysia. These personal tax reliefs reflect the government’s intention to “raise the floor” to narrow income disparities and help ease the effects of rising costs of living.

President, Malaysian Institute of Accountants (MIA)

MIA applauds the continuity of fiscal reform initiatives to further strengthen the government's fiscal position towards meeting the fiscal deficit target of 3% and a debt-to-GDP ratio of 60% in the medium term, as stipulated under the Public Finance and Fiscal Responsibility Act 2023.

MIA welcomes the government’s e-Invoicing measures and commends the budget’s emphasis on broadening the tax base to support fiscal responsibility. This includes an accelerated capital allowance for the purchase of computer equipment and software for e-invoicing, allowing claims over two years.  

As a proponent of flexible work arrangements, which has been normalised at the Institute, MIA welcomes the additional 50% tax deduction on the cost of capacity development and purchase of software to be incurred by employers in implementing flexible work arrangements.

It is encouraging that the government has taken the ESG agenda forward with the announcement of the intention to introduce carbon tax. The implementation in 2026 will hopefully give sufficient time for engagement with stakeholders to ensure a smooth introduction.

As part of the consultation, we believe it is important to provide affected industries with adequate notice and time to adapt to the new tax regime. Initially, the carbon tax should be set at a modest rate, with a gradual increase over time to minimise economic disruption and allow businesses to adjust effectively.

It is commendable that we will adopt ESG initiatives using both the carrot and stick approach with tax incentives for investments in carbon capture, utilisation and storage.

Click here for all you need to know about Malaysia's Budget 2025.