KUALA LUMPUR – Malaysians can expect new and targeted tax measures in Budget 2026, as the government aims to boost revenue, reduce its fiscal deficit, and alleviate the strain from rising debt and subsidy bills.
Speaking to Scoop, Universiti Teknologi Petronas adjunct lecturer and economist Samirul Ariff Othman stated that the government is unlikely to implement across-the-board tax hikes. Instead, it will focus on selective and incremental measures that target those best able to contribute.
“It’s important to understand that fiscal recalibration does not mean across-the-board increases,” he said.
“We are likely to see targeted adjustments that strengthen public finances and signal fiscal discipline to investors and credit rating agencies, while keeping the impact on ordinary Malaysians contained.”
Samirul predicted that Budget 2026 would likely involve a mix of refinements to existing taxes and the introduction of new levies, all designed to expand the tax base without sparking widespread public discontent.
“Malaysians should brace for some new or higher taxes,” Samirul said. “But these measures will focus on high-income earners, luxury spending, and specific sectors rather than burdening the wider population.”
One area likely to be targeted, he suggested, is the Sales and Services Tax (SST), which was increased from 6% to 8% on July 1, excluding essentials like food, beverages, and telecommunications.
“Rather than raising the rate again, the government will likely close loopholes and bring more sectors into the tax net,” he said. “Luxury services, online delivery platforms, and short-term rentals like Airbnb are areas that could be targeted.”
Samirul also expects the capital gains tax (CGT) on unlisted shares, introduced on March 1, to be expanded.
“We may see the government slightly increase the rate or broaden the scope of CGT for high-value or speculative transactions,” he said. “However, SMEs and employee stock options are likely to remain exempt to avoid stifling growth and innovation.”
He added that the long-delayed Luxury Goods Tax (LGT) could be introduced in 2026.
“This tax will focus on high-end items like luxury watches, jewellery, designer fashion, and vehicles, but will exclude mid-range goods or essentials,” he explained.
“The idea is to demonstrate fiscal responsibility without adding pressure on ordinary households.”
Selective excise duties, often referred to as “sin taxes”, are also likely to be on the table. “We can expect higher duties on sugar-sweetened beverages and possibly new levies on vape and e-cigarette products,” Samirul said.
“The government is also exploring carbon pricing. While it will probably start with a voluntary carbon market, I don’t think it will be implemented as early as 2026.”
Samirul outlined that the government’s approach is likely guided by three key principles: targeted impact, household offsets, and avoiding broad-based shocks.
“Tiered or discretionary tax measures focused on high-income earners and inelastic consumption are far more likely than a broad-based tax like the return of GST,” he said.
He also believes that any new taxes will be accompanied by offsetting policies to cushion their impact on households.
“We will continue to see cash assistance under STR and SARA, fuel price stabilisation under BUDI95, and improvements in public healthcare and education,” he said. “Offsetting measures like these are essential to prevent additional burdens on the public.”
Despite calls from some economists and industry groups, Samirul confirmed that the government remains resolute in its decision not to reinstate the Goods and Services Tax (GST).
“Finance Minister II Amir Hamzah Azizan has made it clear that SST reform is the preferred strategy,” he said. “This reflects a deliberate decision to avoid broad-based consumption taxes and the economic shocks they can trigger.”
“The government wants to show that it is expanding revenue responsibly and progressively,” Samirul concluded.
“Budget 2026 will likely reflect that by raising more revenue from those most able to contribute, while protecting ordinary Malaysians from further cost-of-living pressures.” - October 8, 2025
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