Anwar Sets RM4,000 Income Benchmark for GST Review as Malaysia Retains SST

Higher incomes must come before a GST return

KUALA LUMPUR: Prime Minister Anwar Ibrahim said on November 12, 2026, that Malaysia would retain the Sales and Services Tax (SST), with a return to the Goods and Services Tax (GST) considered only when incomes reach at least RM4,000 a month. His position comes as the Finance Ministry forecasts SST receipts of RM73.341 billion in 2027, compared with RM55.874 billion collected in 2025.

Anwar, who is also finance minister, told the Dewan Rakyat that living costs remained too burdensome for a tax reaching a wider range of consumers. He was answering questions from Howard Lee, the Pakatan Harapan MP for Ipoh Timor, and Ronald Kiandee, the Perikatan Nasional MP for Beluran, about revenue, national debt and the effect of taxation on businesses and households.

The prime minister described RM4,000 as an income level at which the government could consider reviewing its position:

"If the minimum income of our people reaches RM4,000, we can consider it because although the tax is imposed at a lower rate, it would not be considered too burdensome and we could ensure better revenue," he said.

Anwar gave no date for a GST return. His parliamentary wording referred to minimum income, while the Finance Ministry has previously described the benchmark as a median wage exceeding RM4,000. The precise income measure that would guide any future review has yet to be clarified.

For households, the immediate policy is continued SST rather than a switch to GST. For businesses, the government is offering adjustments to address particular tax problems while keeping the existing framework.

What the official revenue forecast shows

The Finance Ministry's 2027 Fiscal Outlook provides the clearest picture of how much the government expects the current system to collect. Its revenue table puts SST at RM66.999 billion in 2026 and RM73.341 billion in 2027.

Those figures represent an increase of RM6.342 billion, or about 9.5%, between 2026 and 2027. Compared with the RM55.874 billion collected in 2025, the projected increase by 2027 is RM17.467 billion, or about 31.3%.

The ministry attributes stronger receipts to the full effect of the SST expansion and the phased introduction of electronic invoicing. Electronic invoices create digital transaction records, helping the tax authorities check what businesses should pay and whether they have paid it.

Sales tax is forecast to bring in about RM30.9 billion in 2027, while service tax is expected to generate RM42.4 billion. Together, SST would contribute about 3.2% of gross domestic product (GDP), the value of goods and services produced by the economy.

Anwar and Treasury Secretary General Johan Mahmood Merican used 3.2% in comparing SST receipts with GST revenue in 2017. Anwar was also quoted giving 2.2% in the same parliamentary comparison; the ministry's published forecast specifies 3.2% for 2027.

The official tables also distinguish between revenue before and after proposed Budget 2027 measures. The headline forecast is RM380.817 billion before those measures. After a net revenue reduction of RM2.972 billion, the estimate becomes RM377.845 billion. These are different stages of the budget calculation.

Why the government favours SST

Anwar's central argument is about who carries the cost. He said GST would spread taxation more widely across consumers, including people with low incomes, while SST concentrates collection on a narrower group of businesses and taxable activities.

The prime minister acknowledged that businesses can pass some SST costs to customers. Explaining his preference for the current system, he told MPs:

"In principle, SST is a tax on businesses, although a small portion of it is passed on to consumers. That is true. But GST is comprehensive. So, I do not understand why those claiming to champion the people want to impose a tax on everyone," he said.

Anwar said about 2,000 types of goods and services were exempt under SST, compared with roughly 750 under GST. He also compared about 700,000 businesses covered by GST in 2018 with around 130,000 under the current SST system. The Finance Ministry records 123,567 SST registrants at the end of 2025, up from 94,783 in 2018.

Johan supported the government's position at the TaxMax conference on November 12. He said replacing SST with GST at an equivalent rate would not necessarily produce more revenue, while a rate high enough to raise substantially more could weaken household purchasing power.

Anwar has acknowledged GST's advantages in transaction transparency and price monitoring, including its potential to help track activity in the informal economy. His objection is that those benefits must be weighed against living costs and weaknesses in monitoring and enforcement.

Why businesses worry about repeated taxation

Ronald Kiandee raised a different concern: SST can leave tax embedded in business costs as goods and services move through the economy. A company may pay tax on an expense, include that expense in its selling price, and pass the higher cost to another company or the final customer. This accumulation is often called cascading.

GST uses input tax credits to address that problem. A registered business generally subtracts eligible GST paid on its purchases from the GST collected on its sales. It then pays the balance to the government, or claims a refund when eligible credits exceed the amount due.

Under SST, businesses do not have that general credit mechanism. The effect depends on which goods, services, transactions and exemptions apply. Ronald asked whether GST credits offered a better answer and whether political considerations explained the government's resistance.

Anwar rejected a political explanation and said particular cases of double taxation could be corrected through amendments. He described the government's approach this way:

"The system will remain SST, but with some adjustments to improve it. Why not?" he said.

Businesses had already raised similar cost concerns before the July 2025 expansion. Six associations sought a delay to rental taxation, warning that the planned 8% tax on commercial rental and leasing could push up operating expenses, prices and pressure on smaller firms.

How Malaysia reached the current system

Malaysia's consumption tax debate spans the introduction of GST, its removal and subsequent changes to SST. The main policy dates are:

• April 1, 2015: GST began at a rate of 6%.
• June 1, 2018: The GST rate was reduced to zero following a change of government.
• September 1, 2018: SST returned, replacing GST.
• September 11, 2023: Then economy minister Rafizi Ramli said GST remained one of several possible revenue measures, with decisions considered case by case or year by year.
• March 1, 2024: The service tax rate rose from 6% to 8%, with telecommunications, food and beverages, parking and logistics remaining at 6%.
• July 1, 2025: Malaysia expanded SST coverage to additional activities.
• November 12, 2026: Anwar reaffirmed that SST would remain and linked any GST review to higher incomes.

Rafizi's 2023 comments came during discussion of the 12th Malaysia Plan review. He said the government was prioritising a wider revenue base and capital gains tax, then scheduled for 2024, and that the Finance Ministry would announce any new tax through the budget process.

The July 2025 changes extended service taxation into areas including rental or leasing, construction, financial services, private healthcare and private education. The SST expansion rules included different rates and exemptions according to the activity, business size and other conditions.

Anwar also said on August 18 that the government was prepared to study proposals combining useful features of GST and SST. His latest remarks keep the immediate focus on repairing SST rather than replacing it.

How far wages are from RM4,000

Department of Statistics Malaysia figures cited in the debate put the median wage among formal sector employees at RM3,027 in March 2026, compared with RM3,000 in March 2025. A median is the middle wage: half the employees covered earn less and half earn more.

The increase was RM27, or 0.9%, over a year. Reaching RM4,000 from RM3,027 would require an increase of RM973, equivalent to about 32.1%. This helps explain why the choice of income measure matters so much to the timing of a future review.

Dave Ananth, a former tax director with EY Malaysia who supports restoring GST, argues that waiting for RM4,000 postpones a needed revenue reform. He points to the money required for skills, transport, healthcare and other investments that can help workers become more productive and earn more.

Johan takes the opposite view on timing. He said higher incomes, living costs and global economic uncertainty justify caution, with increases in the minimum wage and wider use of progressive wages among the government's priorities.

The disagreement concerns the order of reform. The government wants stronger household incomes before reconsidering GST. Supporters of an earlier return argue that a broader tax, paired with assistance, could help finance the services and investment needed to support those incomes.

What supporters propose for a new GST

Lee Heng Guie, executive director of the Socio-Economic Research Centre, has suggested starting GST at about 4%, below its former 6% rate. He described 4% as an estimated revenue neutral rate, meaning it could collect roughly as much as the current SST rather than immediately produce a large increase.

Lee's proposal includes taxing basic necessities at zero, continuing cash support such as Sumbangan Tunai Rahmah, and ensuring prompt refunds. Under a zero rate, a seller charges no GST on the eligible item while retaining the ability to recover eligible tax paid on business inputs.

Ananth also favours targeted assistance, a modest initial rate fixed for a defined period, simpler filing and practical support for smaller businesses. His argument draws on figures attributed to the OECD's 2026 Economic Survey, which put Malaysian tax revenue below 13% of GDP and federal debt at around 65% of GDP, and recommended a broad consumption tax alongside targeted transfers.

Economy Minister Akmal Nasrullah Nasir has said about 15% of Malaysia's workforce pays income tax. GST supporters see that narrow base as a reason to collect revenue more widely through spending. Poorer households, however, usually spend a larger share of their income on consumption, making the design of cash assistance and protection for essentials central to any proposal.

Lee also warned that combining SST and GST features could make compliance harder for smaller businesses unless the rules were carefully designed and discussed with those affected.

Refunds remain a test of business confidence

The earlier GST system left a serious refund dispute. The Public Accounts Committee identified failures in managing the refund fund and following financial procedures involving RM19.4 billion in unpaid refunds.

For a business, a delayed refund means money expected back from the government remains unavailable for wages, suppliers or stock. The company may need to borrow or use reserves while waiting. This makes refund administration a practical cost issue, especially for smaller firms with limited cash.

Lee and Ananth both argue that any restored GST must come with timely refunds. Ananth proposes a stipulated payment period and regular publication of performance, alongside a realistic registration threshold and simple digital filing.

The Finance Ministry expects electronic invoicing to improve compliance and revenue collection under SST. A future GST would also depend on reliable administration: accurate transaction records, clear rules and enough money available to pay legitimate refunds when due.

Lower borrowing alongside continued spending

Anwar paired his tax remarks with figures showing lower annual borrowing. He said new borrowing fell from RM100 billion in each of 2021 and 2022 to RM92.6 billion in 2023, RM76.8 billion in 2024 and RM75.6 billion in 2025. The reduction from RM100 billion to RM75.6 billion is 24.4%.

The government continued to fund major commitments, he said, including RM16 billion for Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah assistance, RM18 billion for civil service salary increases and more than RM40 billion for fuel subsidies. He also cited efforts to prevent revenue losses and direct investment towards development and Bumiputera businesses.

Lower annual borrowing slows the addition to accumulated debt. The debt to GDP ratio also depends on the size of the economy, so it can decline while the government continues borrowing.

Johan put the fiscal deficit at 5.5% of GDP in 2022, 5% in 2023, 4.1% in 2024 and 3.7% in 2025, with targets of 3.3% in 2027 and 3% in 2028. A deficit is the gap when government spending exceeds revenue. The original Budget 2026 target was 3.5%, based on economic growth of 4% to 4.5% and crude oil at US$60 to US$65 a barrel.

Johan projected federal debt at 64% of GDP at the end of 2026 and 63.7% in 2027, down from 65.2% at the end of 2025. Anwar gave 63% for 2027 in Parliament. He separately cited a broader measure covering federal debt and liabilities, which eased from 80.9% at the end of 2022 to 80.7% at the end of June 2026.

The government's immediate plan is to collect more through expanded SST and better compliance while gradually narrowing the deficit. The next stated fiscal milestones are the 2027 deficit target of 3.3% and the 2028 target of 3%.

Key Points

• Anwar said Malaysia would retain SST and consider GST only after incomes reach at least RM4,000 a month.
• No GST implementation date was announced, and the income measure for a future review needs clarification.
• The Finance Ministry forecasts SST receipts of RM73.341 billion in 2027, about 3.2% of GDP.
• The government is open to targeted SST changes addressing double taxation.
• GST supporters propose a lower starting rate, protection for essentials, cash assistance and prompt refunds.
• Median formal sector wages were RM3,027 in March 2026, about 32.1% below the increase needed to reach RM4,000.
• The government targets a fiscal deficit of 3.3% of GDP in 2027 and 3% in 2028.