Lim Guan Eng Urges Faster Tax Refunds as Malaysia's Arrears Stand at RM29.919 Billion

Nearly RM30 billion still owed as compensation costs rise

Former finance minister Lim Guan Eng has called on Malaysia's federal government to speed up repayment of RM29.919 billion in outstanding tax refunds, warning that delays are squeezing businesses while increasing the government's compensation bill. He proposed limiting the backlog to RM10 billion, roughly a third of the balance recorded for 2025.

In his October 21, 2026 appeal, Lim, the member of parliament for Bagan, cited the 2025 Federal Government Financial Statements and urged faster payments, particularly for the country's 1.2 million small and medium enterprises (SMEs). The money represents taxes paid in excess of what taxpayers ultimately owed.

The pressure is showing up in payments for delayed refunds. According to figures cited by Lim, compensation under Section 111D of the Income Tax Act reached RM109 million in the first nine months of 2026, compared with RM23.64 million for all of 2025. That is about 4.6 times the previous year's total, with three months of 2026 still remaining.

The Finance Ministry has also reported substantial repayments: RM17.15 billion across 3.23 million taxpayer cases through September 30, 2026. Its stated approach is to consider the age of outstanding cases while giving priority to smaller businesses and companies facing cash flow problems.

What the outstanding balance shows

Outstanding tax refunds stood at RM33.342 billion in 2024 and RM29.919 billion in 2025, according to the financial statement figures cited by Lim. Those balances show a reduction of RM3.423 billion, or about 10.3%. Lim described the reduction as RM3.425 billion, a small arithmetic discrepancy in the figures presented.

The decline still left the government owing considerably more than in 2021, when outstanding commitments were RM21.836 billion. The 2025 balance was RM8.083 billion higher, an increase of about 37% over four years.

Lim acknowledged the Inland Revenue Board (IRB), also known as LHDN, for reducing the amount owed. His central argument was that the remaining balance is money belonging to taxpayers and that its return needs to move faster.

How the backlog developed

The annual figures show an uneven pattern: increases in 2022 and 2024, a small decline in 2023, and a larger reduction in 2025. Even after the latest improvement, the balance remained close to RM30 billion.

• 2021: Outstanding tax refund commitments stood at RM21.836 billion.
• 2022: The balance increased to RM25.721 billion.
• 2023: Outstanding commitments eased to RM25.511 billion.
• 2024: The balance rose to RM33.342 billion.
• 2025: Outstanding refunds fell to RM29.919 billion.
• September 30, 2026: Refund payments during the year reached RM17.15 billion, according to the Finance Ministry.
• October 21, 2026: Lim called for quicker repayments and a RM10 billion ceiling on arrears.

Annual repayments and the outstanding balance measure different things. Repayments count money returned during a period. The balance records what is still owed at a particular date, after payments and any newly recognised refund obligations.

For that reason, subtracting the RM17.15 billion paid in 2026 from the RM29.919 billion balance for 2025 would give an incomplete picture. A current balance also needs to account for refund obligations added during 2026. The ministry's September payment figures did not give an updated total for outstanding refunds.

Who received the 2026 payments?

The Finance Ministry outlined its payment figures in a written parliamentary reply published on October 13, responding to Lim's questions about refund timelines, compensation, outstanding amounts by year of assessment and affected taxpayers.

It said RM6.38 billion had been refunded to 3.1 million individual taxpayers and RM8.95 billion to more than 130,000 corporate taxpayers, including micro, small and medium enterprises (MSMEs), through September 30.

Those two amounts add up to RM15.33 billion, leaving RM1.82 billion of the stated RM17.15 billion total outside the breakdown given. The ministry's account did not specify the category for that remainder.

Lim, the former finance minister and Bagan MP, referred to the corporate repayments in his October 21 remarks:

In 2026, RM9 billion was paid to 130,000 companies by Sept 30,

The ministry's RM8.95 billion figure puts corporate repayments at about 52% of the stated total. Companies represented far fewer recipients than individuals, but received a larger amount of money, making the handling of corporate cases particularly relevant to the pace of repayment.

Why delayed refunds matter to smaller firms

Lim warned that keeping businesses' money for extended periods strains corporate liquidity, especially when operating conditions are difficult. Liquidity means having cash available when bills fall due. A company can be profitable on paper and still struggle to pay wages or suppliers if too much of its money is tied up elsewhere.

A tax refund returns an overpayment. For a business waiting for that money, the timing can affect how much cash it has available for routine expenses, stock purchases and other commitments.

Lim focused on Malaysia's 1.2 million SMEs, arguing that faster refunds would relieve pressure on businesses facing a volatile global economy. That figure describes the wider SME population he wants the government to support; the ministry's payment breakdown covers more than 130,000 corporate recipients, including smaller enterprises.

The IRB's stated priorities already recognise this pressure. The Finance Ministry said refund allocations are distributed according to the age of outstanding cases, with priority also given to MSMEs and companies experiencing cash flow problems.

Record payments in 2025 left a large balance

The Finance Ministry's January refund update said the IRB returned RM22.45 billion to 3.6 million taxpayers in 2025, the highest refund level in five years. The ministry was answering a question from Chong Chieng Jen, the member of parliament for Stampin.

December 2025 accounted for an additional RM7.5 billion in payments, compared with RM4 billion previously announced for additional refund allocations. The amount paid in December was RM3.5 billion above that earlier announcement.

The RM22.45 billion annual payment total and the RM29.919 billion outstanding balance together show the scale of the task. Large sums were returned during 2025, yet a substantial amount remained payable at the end of the year.

The 2026 payments through September amounted to about 76% of the full 2025 total. With the periods covering nine months and 12 months respectively, the figures provide a measure of payment volume, while the outstanding balance remains the key measure of how much taxpayers are still waiting to receive.

Which company refunds are due next?

The ministry's January update set out a timetable for corporate refunds. The IRB was to prioritise company refunds for the 2023 year of assessment in the first quarter of 2026 and complete refunds for the 2024 year of assessment by the end of 2026.

A year of assessment is the tax year to which a liability or refund relates. A company receiving money in 2026 may therefore be receiving a refund connected to an earlier tax year.

For taxpayers other than companies, the ministry said excess tax refunds would be paid regardless of the age of the case. Its later parliamentary reply described an allocation process that considers case age while prioritising smaller enterprises and companies under financial pressure.

The end of 2026 is the next stated deadline for the corporate refunds covered by the January timetable. The October repayment figures did not provide a completion count for the 2023 assessment cases or a progress breakdown for the 2024 cases.

Late payments carry a growing public cost

Section 111D of the Income Tax Act provides annual compensation of 2% when excess tax refunds are not paid within the stipulated timeframe. It gives eligible taxpayers compensation for waiting and creates an additional government expense when refunds are delayed.

Lim cited RM23.64 million paid under the provision in 2025 and RM109 million paid by September 30, 2026. The increase was RM85.36 million, even though the 2026 figure covered only nine months.

The compensation bill adds a budgetary reason for speeding up eligible refunds. Businesses are waiting for their overpayments to be returned, while the government faces a growing payment obligation associated with delays.

Lim also pressed leaders of statutory agencies responsible for supporting smaller businesses to advocate more forcefully for repayment. His criticism put responsibility beyond the processing of individual refunds, calling for public bodies representing businesses to press the government consistently.

What a RM10 billion ceiling would require

Lim's proposed RM10 billion ceiling would require a reduction of RM19.919 billion from the 2025 outstanding balance, equivalent to about 66.6%. It would set a much lower tolerance for accumulated refunds than the balances recorded in each year from 2021 to 2025.

The proposal is a call for government action. The Finance Ministry's response committed to settling outstanding refunds promptly, but gave no date for bringing the balance down to RM10 billion.

The two immediate measures of progress are therefore concrete: whether the promised refunds for the 2024 year of assessment are completed by the end of 2026, and how far the outstanding balance falls as repayments continue. For businesses waiting for cash, both the amount returned and the time taken matter.

Key Points

• Lim Guan Eng urged faster repayment of RM29.919 billion in outstanding tax refunds recorded for 2025.
• The Finance Ministry reported RM17.15 billion refunded across 3.23 million taxpayer cases through September 30, 2026.
• Corporate taxpayers received RM8.95 billion, while individuals received RM6.38 billion.
• Compensation for delayed refunds reached RM109 million in nine months, compared with RM23.64 million throughout 2025.
• The ministry's timetable targeted completion of company refunds for the 2024 year of assessment by the end of 2026.
• Lim proposed a RM10 billion ceiling on outstanding refunds, requiring a reduction of about two thirds from the 2025 balance.