Budget 2027 could deliver double relief for businesses, middle-income Malaysians - CIMB securities

Malaysian businesses and middle-income households may benefit from a double boost in Budget 2027 through expanded sales and service tax (SST) exemptions and targeted personal income tax cuts, according to CIMB Securities. The research firm predicts that businesses could receive broader exemptions for production-related inputs, alleviating heightened energy, logistics, and operational expenses.

This could result in a potential RM1 billion reduction in government collections, despite a projected 5.5% increase in SST revenue to RM72 billion in 2027. Unlike general input tax credit mechanisms present in the goods and services tax (GST), SST lacks such flexibility, leading to embedded tax costs in the supply chain. For households, CIMB sees potential for tax relief for middle-income earners facing higher living costs but receiving lesser direct cash assistance.

They propose reducing tax rates for specific income brackets: from 25% to 10% for RM50,001 to RM70,000, from 25% to 18% for RM70,001 to RM100,000, and even splitting the 25% bracket into a 24% rate for RM100,001 to RM150,000. This could result in annual tax savings of RM200 for those with RM70,000 in chargeable income, RM500 at RM100,000, and up to RM1,000 for those earning RM150,000 and above.

The illustrative tax package would cost the government around RM800 million annually. CIMB also expects the budget to maintain fiscal consolidation, with the fiscal deficit narrowing slightly to 3.4% of GDP in 2027 from 3.5% in 2026. Cash assistance under Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah is forecast to increase by RM2 billion to RM17 billion, partly due to reduced fuel subsidy spending.