Global Economy

published : 2023-10-14

Malaysia to Introduce New Taxes, Slash Subsidies in Economic Reform Push

Luxury tax among new policies touted by PM Anwar Ibrahim

A photo of Prime Minister Anwar Ibrahim announcing the economic reform measures while tabling the 2024 federal budget in Parliament. (Taken with a Canon EOS 5D Mark IV)

Malaysia is set to embark on a transformative economic reform journey, with Prime Minister Anwar Ibrahim announcing the introduction of new taxes and the reduction of subsidies.

In his speech while tabling the 2024 federal budget in Parliament, Anwar revealed that the measures aim to address economic imbalances and assist people in dealing with the rising cost of living amidst a global economic slowdown.

As part of the economic reforms, Malaysia plans to progressively reduce subsidies and implement taxes on luxury goods, among other measures.

Anwar highlighted that the country's subsidies for fuel, food, and other items are currently among the highest in the world, while taxes are among the lowest.

To rectify this imbalance, the government aims to restructure the subsidy system and redirect the funds to target those in need.

An image showing the impact of rising cost of living on people in Malaysia. (Taken with a Nikon D850)

Starting next year, the subsidy restructuring will be phased in, with the goal of plugging any leakage and passing on the savings to the people through increased cash aid and higher wages.

Anwar also announced the introduction of a luxury goods tax, ranging from 5% to 10%, targeting items such as jewelry and watches.

Additionally, a 10% capital gains tax will be implemented to expand the government's revenue base.

However, Anwar reassured that tourists will be exempt from the luxury goods tax.

Furthermore, the services tax will be raised from 6% to 8%, excluding sectors such as food, beverages, and telecommunications.

A close-up photo of luxury goods, such as jewelry and watches, which will be subject to the new taxes. (Taken with a Sony Alpha a7 III)

These comprehensive reforms are expected to contribute to the reduction of Malaysia's fiscal deficit from an estimated 5% of gross domestic product this year to 4.3% next year.

The government's commitment to fostering sustainable economic growth and ensuring the funds are channeled effectively to support those in need is further exemplified through these reforms.

By rebalancing the subsidy system and introducing new taxes on luxury goods and capital gains, Malaysia aims to create a fairer and more robust economic landscape.

These measures, anticipated to boost the country's revenue and reduce its fiscal deficit, hold the potential to shape Malaysia's economic future and improve the welfare of its citizens.