An independent policy perspective on “Reaching for the Sky, While Anchored on Our Values”
Date: 10 October 2026
Introduction: Beyond the Size of the Budget
Malaysia’s Fifth MADANI Budget for 2027, presented on 9 October 2026 under the theme “Reaching for the Sky, While Anchored on Our Values”, sets out an ambition to combine economic advancement with social justice, institutional integrity and fiscal responsibility. The budget proposes RM459.8 billion in federal expenditure, with federal revenue projected at RM380.8 billion and the fiscal deficit targeted at 3.3% of gross domestic product (GDP).¹ ²
The government has introduced important measures, including RM16 billion for Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA), continued targeted assistance, higher minimum wages and additional investment in public services. The budget also maintains a substantial commitment to subsidies, assistance and incentives, expected to exceed RM80 billion in 2027, including approximately RM40 billion for fuel subsidies.¹
These commitments demonstrate the continuing challenge facing Malaysia: how to improve household welfare and productive capacity while reducing the fiscal deficit, managing public debt and funding future development.
The central question is therefore not simply whether Malaysia can afford additional programmes. It is whether the country can obtain greater social and economic value from each ringgit spent, collect revenue more fairly, reduce inefficient expenditure and invest in programmes that strengthen citizens’ long-term opportunities.
The International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) have independently identified several relevant priorities, including stronger tax administration, better-targeted subsidies, a broader and more coherent tax base, improved public spending and stronger social protection.³ ⁴ These findings support further reform, although they do not mean that every proposed measure will automatically produce the same results in Malaysia.
This article presents 25 ranked recommendations for strengthening Budget 2027 and the Thirteenth Malaysia Plan (RMK13), covering revenue, household welfare, productivity, transport, education, healthcare, digitalisation, climate resilience and governance. The rankings reflect expected citizen benefit, evidence strength, fiscal implications and the feasibility of achieving measurable outcomes.
The recommendations are proposals, not measures already approved by the government. Revenue scenarios and programme costs are explicitly distinguished from official budget figures.
Part I: The 25 Recommendations, Ranked by Public Value
Rank 1. Strengthen e-Invoicing and Digital Tax Compliance
Malaysia should make digital tax administration a central instrument of fiscal reform.
The existing e-Invoicing programme provides an opportunity to improve the matching of business transactions, income-tax returns, sales and services tax (SST) declarations and other legally available information.⁵ The next priority is to ensure that digital records translate into better compliance without imposing disproportionate burdens on smaller businesses.
A more effective system would identify material discrepancies, prioritise risk-based audits, simplify compliant taxpayers’ reporting obligations and provide straightforward correction mechanisms.
Benefit to citizens: Better tax compliance can strengthen revenue without automatically increasing statutory rates on compliant households and firms.
Fiscal trade-off: Initial expenditure on digital infrastructure, data security and audit capacity. Additional receipts cannot be reliably quantified without Malaysian tax-gap data and post-implementation evaluation.
Rank 2. Establish a Comprehensive Tax-Expenditure Register
Tax exemptions, deductions, allowances and preferential rates constitute public support through forgone revenue. Their fiscal cost should receive scrutiny comparable to that applied to direct grants and spending programmes.
Malaysia should publish a consolidated register identifying major tax incentives, their estimated revenue costs, intended beneficiaries, policy objectives and expiry dates. Independent reviews should determine whether incentives generate additional investment, productivity, skilled employment or other measurable public benefits.
Incentives that are ineffective, duplicative or poorly targeted should be redesigned or discontinued, subject to transparent transition arrangements.
Benefit to citizens: More fiscal capacity for healthcare, education, social protection and infrastructure, with less public support tied up in ineffective concessions.
Fiscal trade-off: Revenue recovery is uncertain and may take time. Sudden withdrawal of effective incentives could reduce investment, so decisions should depend on evidence rather than arbitrary expenditure cuts. The IMF specifically recommends rationalising corporate tax incentives.³
Rank 3. Make Public Procurement More Competitive and Transparent
The Government Procurement Act and the commitment to publish project and contractor information provide an important foundation.¹ The next objective should be to ensure that procurement disclosure improves value for money, not merely transparency.
Material contracts should provide accessible information on tender participation, award rationale, contractor ownership where relevant, original contract values, variation orders, final costs and completion performance.
Repeated single-bid awards, unexplained price differences, large cost overruns and frequent contract variations warrant risk-based scrutiny. Legitimate emergency and specialised procurement should remain possible, but exceptions must be justified and auditable.
Benefit to citizens: Potentially lower procurement costs, better-quality public infrastructure and more confidence that public money is spent fairly.
Fiscal trade-off: Better data systems, procurement expertise and independent oversight cost money. Gross savings should be measured against credible reference prices rather than assumed in advance.
Rank 4. Publish a Consolidated Fiscal-Risk Statement
Malaysia’s headline spending and investment figures cover different types of government activity. Federal operating and development expenditure must be distinguished from investments by government-linked investment companies, public-private partnerships and other government-linked entities.¹
Budget documents should provide a clearer account of guarantees, contingent liabilities, long-term commitments, maintenance obligations and material risks associated with government-backed projects.
This should complement the Fiscal Responsibility Act and existing reporting requirements.
Benefit to citizens: Greater protection against hidden liabilities and future expenditure pressures that could otherwise lead to higher borrowing, taxes or reductions in public services.
Fiscal trade-off: Primarily administrative and analytical costs. Better disclosure does not necessarily create immediate cash savings, but it improves the quality of fiscal decisions.
Rank 5. Improve Subsidy Targeting and Reinvest Verified Savings
Fuel subsidies remain a significant fiscal commitment. Better targeting can reduce subsidies that do not reach intended beneficiaries while protecting households that depend on affordable transport and energy.
Malaysia should continue improving eligibility assessment using reliable socioeconomic information, transparent rules and effective appeals. Particular attention should be given to rural households, people with disabilities, shift workers and communities without practical public-transport alternatives.
Any savings should be reported against a clearly defined baseline, including the cost of compensating vulnerable households.
Benefit to citizens: Better protection for those who need assistance most and more fiscal room for services that improve long-term welfare.
Fiscal trade-off: Poor targeting can wrongly exclude eligible households or raise living costs. The IMF’s reform scenarios estimate potential fiscal improvements of approximately 0.1–0.5% of GDP from further fuel-subsidy reform and a similar range from improved targeting of non-fuel subsidies and assistance. These are modelled scenarios, not guaranteed Budget 2027 savings.³
Rank 6. Create a More Integrated Digital System for Citizen Benefits
Malaysia should build on existing digital-government infrastructure to reduce repeated applications, duplicated paperwork and missed entitlements.
A secure, integrated system could help eligible households access relevant assistance across agencies, check application status, update household information and appeal erroneous decisions.
Digital access must not become a barrier. Citizens without smartphones, reliable internet or the ability to navigate online services must retain equivalent assisted-digital, telephone and counter-based options.
Benefit to citizens: Less time spent navigating government services and fewer missed benefits due to administrative barriers.
Fiscal trade-off: Investment in cybersecurity, data governance, interoperability and service quality. Savings should be demonstrated through lower administrative costs and improved service outcomes.
Rank 7. Improve the SST System Without Reintroducing GST
Malaysia should prioritise a more coherent and predictable SST regime rather than assume that increasing headline rates is the best source of additional revenue.
Reforms should clarify treatment across business-to-business transactions, remove unjustified coverage gaps, improve compliance procedures and reduce avoidable tax cascading where feasible.
Businesses need clear guidance and reasonable transition periods. The objective should be to collect revenue more effectively while limiting unnecessary distortions and compliance expenses.
Benefit to citizens: More predictable business costs and prices, alongside a stronger revenue base.
Fiscal trade-off: Some exemptions may have legitimate social or economic purposes. The IMF estimates that consumption-tax reform—through GST reintroduction or, as a second-best option, further SST base broadening—could yield 0.5–1.0% of GDP under its fiscal reform scenarios. That range is not a forecast of SST-only receipts for 2027.³
Rank 8. Improve Taxation of Non-Resident Income and Strengthen Existing Levies
Malaysia should improve compliance among non-residents earning Malaysian-source income and review existing foreign-worker levy arrangements before introducing a general surcharge on non-citizens.
Priorities include accurate payroll reporting, tax clearance where required, correct withholding on payments to non-residents, reliable collection of existing immigration and accommodation charges, and enforcement of the foreign-purchaser stamp duty already in force.
Foreign workers, expatriate professionals, tourists, students and overseas investors have different circumstances. Charges should reflect taxable income, employer obligations, property transactions or identifiable service costs—not merely citizenship.
Benefit to citizens: Better collection from existing economic activity without imposing a new general tax on compliant households and businesses.
Fiscal trade-off: Enforcement, data matching and administration require resources. Any change to foreign-worker levies must account for labour shortages, wage effects, small-business costs and the risk of encouraging undocumented employment.
Rank 9. Improve the Taxation of Material Capital Income
Malaysia should review differences in the treatment of economically similar forms of income, including relevant capital gains, dividends, rental income and investment returns.
The objective is to reduce unjustified exemptions and disparities while retaining sensible treatment for ordinary savings and smaller investors. Reform should be coordinated with existing taxes to avoid unintended double taxation.
This is preferable to rushing into a broad annual net-wealth tax before valuation and enforcement capacity are well established.
Benefit to citizens: A more consistent distribution of the tax burden and a stronger relationship between tax liability and economic capacity.
Fiscal trade-off: Revenue depends on the eligible base, exemptions, avoidance responses and investment behaviour. The IMF identifies strengthening personal income taxation as a potential revenue measure, but its 0.5–1.0% of GDP scenario concerns the broader personal-tax framework, not capital-income reform alone.³
Rank 10. Introduce a Credible Carbon-Pricing Framework
Malaysia should provide a clear and predictable framework for carbon pricing, including covered sectors, emissions measurement, price-setting principles and revenue use.
A gradual approach would allow firms and workers to adjust while providing stronger incentives for energy efficiency and emissions reduction. Vulnerable households and viable small suppliers may require targeted transition support.
Benefit to citizens: Reduced environmental damage, greater incentives for cleaner investment and potentially lower long-term climate-related costs.
Fiscal trade-off: Carbon pricing can raise production and household energy costs unless designed carefully. The OECD models a potential long-run fiscal improvement of around 0.5% of GDP, but that is not a guaranteed 2027 revenue forecast.⁴
Rank 11. Introduce a Progressive Vehicle-Emissions Levy
Malaysia should consider reforming motor-vehicle taxation so that high-emission new vehicles face progressively higher charges, while cleaner vehicles receive appropriately designed incentives.
The levy should be integrated with existing vehicle taxes rather than simply added to them without reviewing the overall burden. Separate rules are needed for private cars, light commercial vehicles and heavy-duty transport, reflecting different emissions characteristics and practical alternatives.
The OECD reports that environmental or fuel-efficiency criteria are incorporated into vehicle purchase or registration taxes or incentives in 34 of its 38 member countries.¹³ Singapore provides a relevant regional example through its Vehicular Emissions Scheme.¹⁴
Benefit to citizens: Stronger incentives for cleaner vehicles, potentially lower urban air pollution and a more consistent signal for vehicle manufacturers and consumers.
Fiscal trade-off: Higher upfront costs for some vehicle buyers and potentially lower receipts over time if purchasing shifts to lower-emission models. Revenue should be modelled against Malaysia’s vehicle-registration data rather than assumed.
Rank 12. Expand Klang Valley Bus Services, Prioritising Electric Buses
The Klang Valley requires a stronger, more reliable bus network to complement its rail system and improve access to stations, employment centres and underserved suburbs.
A recent analysis in The Edge estimates that approximately 1,200 buses operate across the Klang Valley and suggests a remaining shortfall of around 4,000 buses after accounting for an existing procurement programme.⁷ The Public-Private Infrastructure Advisory Facility cautions that bus requirements depend on population, route design, capacity, utilisation and the availability of other transport modes.⁶
A preliminary five-year capital planning envelope of RM5.5–7.5 billion for 4,000 additional buses, including an allowance for electric-bus charging and depot infrastructure, is plausible for discussion but is not an approved procurement cost.
Benefit to citizens: Better access to jobs, education and public services; potentially lower household transport expenditure and reduced reliance on private vehicles.
Fiscal trade-off: Significant upfront capital spending, together with continuing costs for drivers, electricity, maintenance, batteries and service contracts. The investment only delivers value if buses operate reliably and at useful frequencies. Evidence from Indonesia also supports prioritising public-transport electrification alongside fleet expansion rather than treating electric vehicles solely as a private-car policy.⁸
Rank 13. Move Towards Universal School Meals, Starting with Primary Schools
Malaysia’s existing Rancangan Makanan Tambahan (RMT) provides targeted meals to eligible primary-school pupils, while Budget 2027 allocates RM870 million for more than 800,000 pupils under the programme.¹ ¹⁰
A universal primary-school lunch programme could be considered as a longer-term extension, drawing lessons from Japan’s public primary-school meal support while adapting standards and delivery arrangements to Malaysia’s circumstances.¹¹
For illustration, feeding 2.754 million primary pupils for 190 school days at RM5 per meal would cost approximately RM2.62 billion annually in food alone. Extending the same assumption to 5.3 million pupils would cost approximately RM5.04 billion annually. These are scenario calculations, not official programme estimates, and exclude delivery, infrastructure, administration and monitoring.
Benefit to citizens: Lower household food expenditure during the school day, more consistent access to nutritious food and potential benefits for child development.
Fiscal trade-off: A permanent recurring expense, potentially several billion ringgit annually. It requires credible costing and evidence on nutrition, participation, food waste and delivery quality. KRI supports considering wider school feeding but also identifies the need for more rigorous evaluation of existing programmes.⁹
Rank 14. Expand Affordable, High-Quality Childcare and Preschool
Affordable early-childhood care is both a social-policy issue and a labour-force participation issue.
Malaysia should improve access to registered childcare, strengthen quality standards and consider more targeted subsidies for families facing financial barriers. Priority should go to disadvantaged children and working parents, including single-parent households.
Benefit to citizens: Better early learning opportunities, lower childcare costs and improved ability for parents—especially mothers—to remain in paid employment.
Fiscal trade-off: Additional recurrent spending and the cost of quality assurance. The OECD identifies limited childcare capacity as an important constraint and recommends expanding access to affordable, quality-assured provision.⁴
Rank 15. Strengthen Minimum Income Protection in Old Age
Malaysia should improve support for older people who lack adequate retirement income, particularly those who spent their working lives in informal or low-paid employment.
A carefully assessed, means-tested social-pension framework could complement existing EPF savings, pensions and other assistance. Eligibility should reflect household circumstances and avoid abrupt loss of benefits when income rises slightly.
Benefit to citizens: Better protection against poverty and deprivation in later life.
Fiscal trade-off: A permanent spending commitment that grows as the population ages. The OECD reports that fewer than 20% of older people receive any form of social benefit and recommends broader means-tested social-pension coverage.⁴
Rank 16. Link TVET and Tertiary Funding to Employment Quality
Skills programmes should be assessed by whether they lead to useful capabilities and sustainable employment, rather than enrolment and graduation figures alone.
Malaysia should publish comparable information on programme completion, employment, earnings, skills matching and employer satisfaction. Institutions should work closely with industry in curriculum design, apprenticeships and equipment planning.
Outcomes must be interpreted carefully so that rural institutions and essential public-service occupations are not unfairly penalised for lower starting salaries.
Benefit to citizens: Better employment prospects and more productive use of education funding.
Fiscal trade-off: Costs of data collection, assessment and programme redesign. The OECD identifies skill-related underemployment among tertiary graduates as a continuing concern.⁴
Rank 17. Consolidate SME Support and Fund Measurable Productivity Gains
Malaysia has numerous grants, financing facilities and advisory programmes for micro, small and medium-sized enterprises (MSMEs). Their value would improve if businesses could navigate them more easily and government could evaluate results consistently.
A consolidated support framework should prioritise digital accounting, automation, quality certification, energy efficiency, export readiness and workforce upgrading.
Benefit to citizens: More competitive local businesses, potentially better-paying jobs and improved productivity.
Fiscal trade-off: Some administrative consolidation costs, with potential savings from reducing duplicated programmes. Funding should be judged by additional productivity and employment outcomes, not merely the value of grants disbursed.
Rank 18. Improve Healthcare Purchasing and Digital Records
Malaysia should seek more health services and better continuity of care from each ringgit of public spending.
Priority areas include transparent reference prices for frequently purchased medicines and equipment, appropriate use of quality-assured generics, better inventory management and secure interoperability of electronic medical records.
Benefit to citizens: Less avoidable wastage, better continuity of care and potentially shorter waiting times.
Fiscal trade-off: Technology, cybersecurity and system-transition costs. Clinical independence, privacy and access controls must be protected. The main benefit is better service quality and efficiency rather than an assured immediate cash saving.
Rank 19. Modernise Property Taxation and Evaluate Land-Value Capture
Malaysia should improve the administration of existing property-related taxes and evaluate mechanisms through which a share of publicly created land-value gains can support infrastructure.
Any review should be gradual, transparent and coordinated with state and local authorities. Appropriate deferrals may be necessary for low-income owner-occupiers who have valuable property but limited cash income.
Benefit to citizens: Potentially stronger local services, more sustainable infrastructure funding and better alignment between publicly financed development and the value it creates.
Fiscal trade-off: Revaluation and administration costs, political sensitivity and possible distributional effects. Property taxes and land-value capture are not interchangeable with broad new transaction taxes.
Rank 20. Strengthen Health-Related Excise Duties
Malaysia should review the effectiveness of existing taxes on tobacco, nicotine products and sugar-sweetened beverages, with an emphasis on reducing harmful consumption.
A sugar-content-based tax structure may offer manufacturers incentives to reformulate products. Tobacco and nicotine duties should be accompanied by strong enforcement against illicit supply.
Benefit to citizens: Potentially lower preventable disease and long-term healthcare burdens.
Fiscal trade-off: Consumption may decline, so a successful health tax may not provide continuously rising revenue. Distributional effects and illicit-market responses must be monitored.
Rank 21. Improve Social Protection for Gig Workers
Budget 2027 already provides a RM160 million package shared by the government and Grab to support gig-worker income and protection.¹ The next priority is a coherent system that does not depend excessively on a single platform or employment arrangement.
Portable social protection, clearer net-income statements and consistent contribution rules across comparable platforms would improve protection for workers with multiple sources of earnings.
Benefit to citizens: More predictable net income and better protection against occupational injury and income shocks.
Fiscal trade-off: Government matching contributions and administration may require continuing expenditure. The existing package should be evaluated before expanding subsidies.
Rank 22. Improve Affordable Housing Through Supply and Land-Use Reform
Stamp-duty relief can lower some home-purchase costs, but it cannot by itself resolve housing shortages, unsuitable locations or limited access to rental housing.
Malaysia should improve the supply of affordable homes in suitable locations, streamline predictable planning processes and coordinate housing with public transport and employment centres. Public and GLC land should be assessed transparently where it can support genuinely affordable housing.
Benefit to citizens: More practical housing options and potentially lower commuting costs.
Fiscal trade-off: Infrastructure and development costs, together with the risk that buyer subsidies are absorbed into higher prices when supply is constrained.
Rank 23. Prioritise Energy Efficiency and Climate Adaptation
Public investment should reduce households’ exposure to energy costs, floods, extreme heat and other climate-related risks.
Targeted energy-efficiency improvements for low-income homes can complement appliance rebates by reaching households unable to afford the initial purchase. Adaptation investments should be evaluated by the damage they are expected to prevent over their lifetime.
Benefit to citizens: Lower recurring energy costs and reduced disruption and damage from climate hazards.
Fiscal trade-off: Some programmes require upfront spending, and benefits may accrue over many years. Prioritisation should depend on measured energy savings and expected losses avoided.
Rank 24. Strengthen Competition and Reduce Unnecessary Regulatory Burdens
Competition enforcement and simpler regulation can help firms grow without requiring continual grants or tax incentives.
Malaysia should strengthen detection of bid-rigging and anti-competitive conduct, improve governance in government-linked companies and review duplicative business permits and reporting requirements.
Benefit to citizens: Potentially better prices, stronger service quality and more competitive markets.
Fiscal trade-off: Enforcement and regulatory review require expertise and resources. Benefits depend on actual changes in market behaviour, not just new rules.
Rank 25. Require Rigorous Evaluation of Major Budget Programmes
Every major new programme should be assessed against a clear baseline and measurable outcomes.
Where feasible, credible comparison groups and suitable causal-evaluation methods should be used to distinguish the effects of a policy from broader economic changes. Randomised evaluations may be appropriate for some interventions; others require quasi-experimental or different rigorous approaches.
Benefit to citizens: More effective programmes, less repeated spending on unsuccessful measures and stronger accountability.
Fiscal trade-off: Evaluation has a cost, but well-designed assessment can prevent far greater waste. A programme’s popularity or rapid disbursement should not substitute for evidence of its results.
Part II: Non-GST Revenue Measures, Ranked by Merit
Malaysia needs a stronger and more sustainable revenue base. That does not mean every possible tax should be introduced. The most defensible measures are those that relate reasonably closely to taxable income, consumption, pollution or identifiable public costs, while limiting unnecessary economic distortions.
The following ranking excludes GST, as requested.
1. E-Invoice Enforcement and Digital Tax Administration
Merit: Very high.
Improve compliance with existing tax obligations by using e-invoice information, risk-based audits and legally available third-party data. Publish the net additional revenue obtained from enforcement after accounting for audit and administrative costs.
The revenue yield should remain unquantified until supported by Malaysian tax-gap data.
2. Rationalise Tax Expenditures
Merit: Very high.
Publish the cost of major exemptions and incentives, review their effectiveness, and redesign or discontinue those that cannot demonstrate additional public value.
This is potentially more defensible than raising rates across the board, although the revenue impact depends on the existing incentive base and the behaviour of affected businesses.³
3. Strengthen Personal and Capital-Income Taxation
Merit: High.
Review material exemptions, deductions and inconsistent tax treatment of capital income, with appropriate protection for ordinary savers and careful coordination between tax provisions.
The IMF identifies strengthening the personal income-tax framework as a possible source of additional revenue, but a Malaysian-specific estimate is needed for any particular change.³
4. Broaden the SST Base and Improve Its Design
Merit: High.
Clarify tax coverage, reduce avoidable cascading, close unjustified gaps and improve compliance without assuming a general rate increase is necessary.
The IMF estimates a potential 0.5–1.0% of GDP for consumption-tax reform through GST or, as a second-best option, broader SST. This is a modelled policy scenario, not a forecast for SST alone.³
5. Introduce Carbon Pricing with Targeted Household Protection
Merit: High, with environmental benefits.
Establish a predictable framework for charging covered emissions while directing support towards vulnerable households and viable transition investments.
The OECD’s modelled long-run estimate of around 0.5% of GDP is indicative rather than a guaranteed near-term yield.⁴
6. Improve Foreign-Worker Levy Design and Non-Resident Tax Compliance
Merit: High if properly targeted.
Review the existing foreign-worker levy and strengthen collection of tax on Malaysian-source income. The obligation should depend on the relevant tax and employment rules, rather than citizenship alone.
An illustrative sensitivity scenario can be built from the Ministry of Finance’s projected RM3.7 billion in foreign-worker levy revenue for 2027: a 5%, 10% or 15% increase in the effective aggregate yield would represent RM185 million, RM370 million or RM555 million respectively. These figures are assumptions, not forecasts that a progressive levy reform would deliver those increases. Revenue may be lower if behaviour changes or exemptions increase.
7. Modernise Health-Related Excise Duties
Merit: Medium to high.
Review tobacco, nicotine and sugar-sweetened beverage taxes to strengthen health incentives and enforcement. Revenue should be treated as secondary to the reduction of harmful consumption.
8. Improve Property-Tax Administration and Evaluate Land-Value Capture
Merit: Medium to high.
Improve the administration of existing recurring property taxes and assess transparent arrangements to capture part of the value created by major public infrastructure. This requires cooperation with state and local authorities.
9. Strengthen Tourism-Tax Collection
Merit: Medium.
Improve registration and reporting by accommodation providers and relevant digital booking platforms before increasing rates. The government should establish a verified baseline of taxable room-nights and exemptions.
10. Progressively Tax High-Emission New Vehicles
Merit: Medium to high, primarily as environmental reform.
Integrate a progressive emissions levy with the existing vehicle-tax structure. The primary aim should be to encourage cleaner vehicle choices, not to create an uncertain permanent revenue stream.
11. Reassess the EPT Proposal, but Do Not Introduce It Yet
Merit: Low for immediate implementation.
A broad Electronic Payments Tax (EPT) could generate substantial gross revenue in theory, but taxing money movements rather than final economic activity risks cascading, regressivity and shifts towards untaxed channels.
A 2025 proposal reported by BusinessToday suggested RM7.2 billion at 0.25% and RM28.8 billion at 1%. Those calculations imply a taxable transaction base of RM2.88 trillion, but the article does not establish a sufficiently verified, net taxable base or fully account for behavioural responses.
The better course is for the Treasury to evaluate the proposal independently, compare it with available alternatives and require a credible assessment of net revenue, distributional effects and economic distortions before considering legislation.¹⁶
Taxes I Would Not Prioritise Now
I would not make a broad annual net-wealth tax, a new remittance tax, or an additional general surcharge solely on non-citizen status a priority for Budget 2027. Each creates substantial design, enforcement or distributional questions that need stronger evidence.
Where Malaysia already has taxes and fees, the immediate priority should be fair assessment and effective collection. Existing foreign-property stamp duty, tourism tax and public-service charges should be evaluated on their own legal and fiscal merits rather than counted as new measures when they are already in force.
Part III: What Does the Fiscal Evidence Tell Us?
The policy objective is to improve public welfare without weakening fiscal sustainability.
The 2027 budget projects RM380.8 billion in federal revenue against RM459.8 billion in expenditure and targets a deficit of 3.3% of GDP.¹ ² These figures leave limited room for large, permanent commitments without credible funding or offsetting reforms.
Three distinctions are essential.
First, capital and recurrent expenditure must be separated. A multi-year bus procurement is primarily a capital investment, although operating and maintenance costs recur. School meals, in contrast, create a recurring annual obligation. A programme costing RM5 billion in food alone each year cannot be assessed as if it were a one-off development project.
Second, modelled fiscal potential is not cash available to spend. IMF and OECD estimates describe particular reform scenarios and assumptions. They should not be added together as though they were independent, guaranteed receipts. Subsidy reform, tax compliance, tax-base changes and household compensation can interact.
Third, distribution matters. A policy can increase government revenue yet leave low-income households worse off. Targeted assistance, well-designed exemptions, accessible appeals and transparent reporting are therefore part of sound fiscal policy, not optional additions.
The Treasury should disclose expected net fiscal impacts, including administration, compensation, behavioural changes and recurring obligations, before major reforms are counted as funding for new spending.
Part IV: A Nobel-Informed Approach to Better Policy
The recommendations above are consistent with several influential research traditions associated with Nobel Prize-winning economists. These frameworks help clarify trade-offs, but a Nobel Prize does not itself validate a particular policy.
James Mirrlees’s work on optimal income taxation highlights the trade-off between raising revenue, achieving distributional objectives and preserving incentives.¹⁷ This supports considering the distribution of tax burdens and the treatment of different income sources rather than focusing solely on statutory rates.
Research on information asymmetry and incentives emphasises that institutions, information and enforcement influence how policies work in practice. This is directly relevant to tax administration, procurement, subsidies and public-service delivery.
The 2019 Nobel Prize in Economic Sciences recognised work on experimental approaches to alleviating global poverty, including the use of credible evaluation to identify which interventions produce results.¹⁸ That methodology supports testing whether school meals, childcare support, training programmes and SME grants generate the intended benefits rather than assuming that spending alone guarantees success.
Climate-economics research also highlights the need to account for pollution and other external costs that market prices may fail to reflect. This supports considering carbon pricing and emissions-based vehicle taxation, provided their distributional effects are addressed.⁴
The shared lesson is methodological: define the intended outcome, assess the costs and incentives, use the best available evidence, and revise policies when observed results differ from expectations.
Conclusion: Better Value for Every Ringgit
Budget 2027 already contains meaningful support for households, workers, businesses and public services. Its next improvement should be a stronger link between revenue reform, the quality of expenditure and measurable improvements in citizens’ lives.
The 25 recommendations in this article are not a demand to introduce 25 new programmes at once. They are a ranked policy agenda. The strongest immediate priorities are improved tax compliance, rationalisation of ineffective incentives, more competitive procurement, better-targeted subsidies and stronger fiscal transparency. These can help build the conditions for longer-term investments in buses, school meals, childcare, healthcare and social protection.
Malaysia should pursue revenue measures that are transparent, administratively feasible and economically defensible. A broader non-GST revenue strategy is possible, but it requires careful costing and prioritisation rather than speculative revenue targets.
Ultimately, the test of Budget 2027 is not the number of announcements or the size of the allocations. It is whether more Malaysians can access reliable public transport, afford essential needs, receive better education and healthcare, earn more productive wages and live with greater financial security.
That is what it means to reach for the sky while remaining rooted in the needs and dignity of the people.
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References
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*Notes on estimates and interpretation
The bus procurement envelope and universal school-meal costs cited in this article are transparent planning scenarios, not approved Budget 2027 allocations. The illustrative bus cost of RM5.5–7.5 billion over five years includes a provisional allowance for charging and depot infrastructure and requires tender-level validation. School-meal calculations use 190 school days and assumed meal prices of RM3.50 or RM5; they exclude other delivery and capital costs.
Similarly, the foreign-worker levy and tourism-tax sensitivity scenarios are not official revenue forecasts. They should not be treated as guaranteed recurring receipts, nor should existing tax revenues be counted as additional revenue simply because a policy is being reviewed.
