The Malaysian government is in the process of refining its income-based subsidy model for next year, with plans to exclude high-income earners from certain subsidies. Prime Minister Datuk Seri Anwar Ibrahim confirmed that the criteria for determining the top income brackets eligible for subsidy cuts—currently under consideration—may shift based on economic needs. The decision may ultimately limit subsidy exclusions to the top 10 per cent (T10) of earners, rather than the top 15 per cent (T15), if the latter proves too broad for the desired fiscal reform goals.
According to the Prime Minister, authorities are carefully evaluating the threshold for high-income earners and whether it aligns with Malaysia’s economic objectives. He hinted that initial assumptions pegging T15 earners at a monthly household income of RM12,000 might be revised, adding that “the amount has not been set in stone.” The Prime Minister also clarified that income levels within the T15 vary widely, suggesting that some within this bracket might not be able to shoulder subsidy cuts comfortably. "If the income threshold at T15 isn’t feasible, adjustments will be made, and we may consider only the top 10 per cent," he stated. To that end, he indicated that a revised T15 income level could potentially be set at RM15,000 or even RM18,000, should authorities deem it necessary.
The government’s approach, Anwar emphasized, is to ensure subsidy removals do not inadvertently place an undue financial burden on those who fall closer to the middle-income range. "Our priority is to protect the majority, particularly those within the lower and middle-income brackets," he noted. Anwar highlighted that the majority of Malaysians—about 85 per cent—would be shielded from subsidy reductions, as the government’s primary concern remains the well-being of those less able to absorb the rising cost of living.
Anwar’s remarks follow the recent announcement of Malaysia’s 2025 Budget, which includes plans for incremental subsidy cuts. He argued that these cuts would allow the government to reallocate resources to other public initiatives, such as boarding schools and higher education institutions. The intention, he explained, is not to impose an additional burden on the public but to channel resources where they are needed most.
In his address at the Perak PKR Convention, the Prime Minister called attention to the income disparity within the T15 group, where some individuals earn significant sums—ranging from RM100,000 to RM1 million a month—well above the RM12,000 level often associated with T15. “There are those advocating for the T15 group, despite some among them earning well beyond average figures,” he observed, underlining that subsidy cuts for the wealthiest within this group are essential for effective fiscal management.
The Prime Minister’s stance has been supported by Economy Minister Rafizi Ramli, who has also outlined the need for Malaysia to recalibrate its subsidy model as part of broader fiscal reform measures. Rafizi highlighted that rolling back petrol subsidies for high-income households in mid-2025 will be essential for improving the nation’s fiscal health, allowing the government to reduce reliance on subsidies and expand the tax base. “Malaysia’s fiscal sustainability depends on these reforms,” Rafizi said, noting that defining the income thresholds for subsidy cuts is complex and will involve more than gross household income alone.
Rafizi further explained that the government would likely adopt a nuanced approach to defining the T15 category, which will account for factors such as the locality of the household and their general spending patterns. “Subsidy eligibility will not hinge solely on income but will consider the cost of living and other variables that impact household finances,” Rafizi clarified. This approach aims to ensure that subsidy cuts target genuinely high-income households, rather than middle-income families who may be impacted by high living costs in urban areas.
Anwar’s plan has sparked mixed reactions among the public, with some voicing concerns that a blanket exclusion based on broad income thresholds might disadvantage certain segments of the middle class, particularly those in areas where living costs are high. To address these concerns, the government has indicated it may implement regional adjustments to subsidy eligibility criteria, offering a buffer for those in high-cost locales who may not necessarily fall within high-income standards when adjusted for regional expenses.
The government’s decision on the threshold will be closely monitored by economic analysts, who recognize that defining “high income” is a delicate balance, particularly in an economy marked by stark income inequalities. This policy, if implemented effectively, could set a precedent in Malaysia’s approach to equitable fiscal reform, positioning the country as a regional leader in targeted subsidy policies.
With Budget 2025’s commitment to addressing fiscal responsibility, subsidy reform represents a critical step toward long-term economic sustainability. The exclusion criteria, still under careful review, aim to retain support for the 85 per cent of Malaysians who may rely on subsidies for essentials, while pushing for greater self-reliance among the wealthiest segments.
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