BUDGET 2026 has been lauded by tax and industry experts as a strong affirmation of the government’s commitment to improving tax governance and tackling revenue leakages, with clear signals that enforcement will be intensified alongside voluntary compliance.
PricewaterhouseCoopers (PwC) Malaysia Head of Tax, Steve Chia, said the latest budget reflects a continuation of reforms initiated in recent years, including the rollout of Tax Identification Numbers (TIN), the e-Invoicing pilot programme, and more streamlined tax administration.
“The government's approach in Budget 2026 sends a clear message — voluntary compliance is encouraged, but enforcement will be uncompromising,” said Chia in a statement.
On the planned carbon tax, scheduled to be introduced next year targeting the steel, iron and energy sectors, Chia stressed the importance of clarity in its scope, rate predictability, and robust reporting standards to drive investment in low-carbon practices.
He also highlighted the need to align the tax with the forthcoming National Carbon Market Policy and the anticipated Climate Change Act.
Meanwhile, Deloitte Malaysia’s Head of Tax and Legal, Sim Kwang Gek, noted that while details on the carbon tax mechanism remain limited, the government appears to be refining the policy to avoid overburdening businesses.
She welcomed the RM50 million Carbon Border Adjustment Mechanism (CBAM) Readiness Fund, calling it a timely measure as Malaysian exporters brace for the European Union’s CBAM coming into force in January 2026.
“Implementing a carbon tax domestically helps prevent tax leakage, as payments under CBAM will otherwise be made abroad. Collecting these revenues within Malaysia is a more strategic move,” she said.
On household incentives, Chia welcomed the expanded personal tax relief of RM2,500 to include food waste disposal machines, encouraging sustainable living practices.
The business community also responded positively. Datuk Ng Yih Pyng, President of the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM), said businesses were relieved that Budget 2026 did not introduce new taxes, given the current environment of high operational costs and soft demand facing micro, small and medium enterprises (MSMEs).
Ng praised the government’s receptiveness to several ACCCIM proposals, particularly on Market Development Grants (MDG), green energy, agricultural investment, property, and Accelerated Capital Allowance (ACA).
“We welcome the proposal to raise the MDG to RM60 million, but recommend a special tax rate be considered for SMEs that have demonstrated strong export growth,” he said.
He also called on the Malaysia External Trade Development Corporation (MATRADE) to raise the MDG lifetime limit to RM500,000 and increase the per-claim ceiling to RM35,000 for international trade fairs and RM10,000 for domestic exhibitions.
However, Ng expressed concern that Budget 2026 did not raise the taxable income threshold for SMEs to qualify for the preferential 15 per cent corporate tax rate, which currently applies only to the first RM150,000 of chargeable income.
“Increasing this threshold would ease financial pressure on SMEs and generate additional savings for business reinvestment,” he added. - October 11, 2025
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