MALAYSIAN businesses and middle-income households could receive a double boost from Budget 2027 through wider sales and service tax (SST) exemptions and targeted personal income tax cuts, potentially easing operating and living costs, CIMB Securities says.
CIMB Securities, in a research note, said there was scope to broaden SST exemptions for production-related inputs as businesses continued to face elevated energy, logistics and other operating costs.
It expects further SST relief to reduce government collections by about RM1 billion, although underlying economic growth should still lift SST revenue by 5.5% to RM72 billion in 2027.
Unlike the goods and services tax (GST), SST does not have a general input tax credit mechanism, meaning businesses can pay tax on inputs without being able to deduct it against tax charged on their own sales.
This can result in tax costs being embedded throughout the supply chain, CIMB said.
The research house expects extending selected exemptions to be the more immediate option in Budget 2027, while a broader input tax credit mechanism could be introduced from 2028 or later because of the additional administrative and refund framework required.
For households, CIMB sees scope for targeted personal income tax relief for middle-income taxpayers, particularly those facing higher living costs but receiving less direct cash assistance.
As an illustration, it said tax rates for chargeable income of RM50,001 to RM70,000 and RM70,001 to RM100,000 could each be reduced by one percentage point to 10% and 18%, respectively.
The current 25% tax bracket could also be split, with a 24% rate applied to chargeable income between RM100,001 and RM150,000.
Such a package could provide annual tax savings of RM200 for taxpayers with RM70,000 in chargeable income, RM500 at RM100,000 and up to RM1,000 for those with RM150,000 and above, CIMB estimated.
It said the illustrative tax package would cost the government about RM800 million a year.
More broadly, CIMB expects Budget 2027 to continue providing household support while maintaining fiscal consolidation, forecasting the fiscal deficit to narrow slightly to 3.4% of gross domestic product in 2027 from an estimated 3.5% in 2026.
The research house also expects cash assistance under Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah to increase by RM2 billion to RM17 billion, supported partly by lower fuel subsidy spending.
CIMB forecasts petrol and diesel subsidies to fall to RM32 billion in 2027 from RM41 billion, creating room for higher household assistance and development spending while keeping the government on its fiscal consolidation path.
Budget 2027, the fifth Madani Budget and the second under the 13th Malaysia Plan, is scheduled to be tabled in Parliament on Oct 9.
The Ministry of Finance has said the budget will focus on areas including cost-of-living pressures, business competitiveness and productivity while maintaining fiscal discipline. - September 18 2026
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