Malaysia considering consumption tax reform, PM Anwar says

Malaysia is exploring reforms to its consumption tax regime, with the government considering the reintroduction of aspects of the Goods and Services Tax (GST). Prime Minister Anwar Ibrahim stated that the aim is to create a more progressive and efficient taxation system.

The GST, previously set at 6%, was scrapped in 2018 following widespread public opposition linked to rising living costs. It was replaced by a narrower Sales and Services Tax (SST). Some analysts have advocated for the GST's return to help the government meet its fiscal targets.

Anwar, who also serves as finance minister, acknowledged the GST as a transparent and efficient tax collection method. However, he expressed concern about its potential impact on the poorest segments of society. He also noted that the current SST regime has weaknesses that necessitate a review, though he did not provide specific details.

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So we need to see how we can combine these two systems to find a new way to determine a more progressive and efficient taxation system.

"So we need to see how we can combine these two systems to find a new way to determine a more progressive and efficient taxation system," Anwar told a finance ministry event. He described the task as a "major challenge" that must be addressed, particularly amidst rising poverty rates and the cost of living.

In 2024, the government had stated it had no plans to reintroduce the GST as an alternative to removing petrol subsidies. As part of efforts to shift from blanket subsidies to more targeted aid, a quota for subsidized RON95 fuel purchases was introduced in 2025. The finance ministry reported in a pre-budget statement on August 18 that targeted subsidies have generated approximately RM15.5 billion (S$4.88 billion) in annual savings, helping to offset a growing subsidy bill exacerbated by higher energy costs from the Middle East conflict. The government is scheduled to present its 2027 budget to Parliament on October 9, focusing on areas such as reducing regional development gaps, addressing cost-of-living pressures, and boosting investment growth.

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It is a major challenge, it has to be done. But it is not simple... with rising poverty rates and rising costs of living.