KUALA LUMPUR (Oct 10): Malaysia expects revenue measures introduced since last year to deliver a boost to the government’s coffers in 2026, even as the growth in receipts will still trail the broader economy.
Revenue is expected to rise a little under 3% to RM343.12 billion, thanks to the expansion in the sales and service tax as well as implementation of mandatory e-invoicing that is aimed at plugging leakages, according to estimates in the Fiscal Outlook and Federal Government Revenue Estimates report.
“The higher total revenue reflects increased efficiency in tax collection and the positive impact of ongoing fiscal reforms,” the Ministry of Finance said.
The growth in government revenue, however, will still lag the pace of the country’s economic expansion at between 4.0% and 4.5% for 2026.
Malaysia has been seeking to widen public income and its narrow tax base amid concerns over a reliance on oil and gas receipts for a significant chunk of revenue. The government, meanwhile, has been gingerly raising taxes after scrapping the highly unpopular goods and services tax in 2018.
Revenue as a share of economic output has been on a decline and may come in at 16.3% in 2026. The trend is also expected to continue until 2028, averaging 15.7% in the three-year period.
Tax revenue is seen rising 6.7% to RM270.38 billion, with company income tax remaining the largest contributor. Individual income tax is projected to increase 9.4% to RM49.1 billion, as salary hikes in the public sector bring more civil servants into the taxable bracket.
Weak oil prices, projected to range US$60-to-US$65 per barrel next year, is expected to drag petroleum income tax down 7.1% this year.
Excise duties are expected to rise 2.3% to RM12.79 billion, underpinned by moderate motor vehicle production and expiry of exemptions for imported electric vehicles beginning 2026.
Non-tax revenue estimates are also lower as Petronas, the national oil and gas company formally known as Petroliam Nasional Bhd, cut its dividend to RM20 billion from RM32 billion this year.
Overall, petroleum-related revenue may fall to RM43 billion, while non-petroleum revenue is expected to rise 8.1% to RM300.1 billion.