Recently, the World Bank released a report suggesting that Malaysia should increase government revenue by lowering the taxable income threshold and raising tax rates for high-income earners. According to report, the World Bank highlighted Malaysia’s Personal Income Tax (PIT) system as having a high taxable income threshold, relatively low tax rates for the wealthy, and unlimited tax reliefs. It argued that this system narrows the tax base and limits the government’s ability to boost revenue.
In October 2023, the World Bank also pointed out that Malaysia relies too heavily on direct taxation, with personal income tax contributing less than 3% of GDP. By reducing the tax threshold and increasing rates for high earners, the government could supposedly generate an additional RM2.5 billion to RM2.8 billion in 2024 (link page 38). Furthermore, by capping tax reliefs, an additional RM1.1 billion could be collected.
Perhaps unsurprisingly, the Ministry of Finance has projected total government revenue to rise to RM339.71 billion this year, up from the revised estimate of RM322.05 billion in 2024—largely driven by increased direct and indirect tax collection. Since a nearly 15% drop in 2020, government revenue has seen a steady recovery. However, the revenue-to-GDP ratio is expected to remain below 18% in 2025, continuing a worrying trend since 2015. This raises concerns over Malaysia’s growing reliance on debt to meet its fiscal needs.
But let’s be clear—this World Bank proposal is deeply troubling. It unfairly burdens professionals and entrepreneurs who have long contributed to the national economy. Why should hardworking, tax-compliant Malaysians bear an even heavier load? Increasing income tax won’t just reduce incentives for productivity—it risks driving Malaysia’s top talent to neighboring countries like Singapore, where tax rates are more competitive.
More alarmingly, this policy could also crush the middle class, which is already struggling under rising living costs. Lowering the taxable income threshold means more ordinary Malaysians will be hit with higher taxes, reducing their disposable income and weakening consumer spending. This, in turn, could slow domestic economic growth.
If the government truly wants to boost revenue, the solution isn’t to punish honest taxpayers—it’s to go after tax evaders. Cracking down on those who exploit loopholes would be far more effective than squeezing those who are already paying their fair share. Additionally, reintroducing the Goods and Services Tax (GST) could be a more balanced approach—provided it comes with a fair rate and a robust rebate system for lower-income groups. Above all, the government must curb wastage and leakages in public spending—starting with cutting unnecessary overseas trips involving family members.
While ensuring tax fairness is commendable, raising taxes on Maha Kaya risks burdening compliant taxpayers rather than true evaders. Equity isn’t achieved through punitive taxation but by broadening the tax base without harming growth. The government must close loopholes, strengthen enforcement, and curb waste—otherwise, even the fairest tax system will fall short.
At a time when economic uncertainty looms large, Malaysians deserve a tax policy that is fair and sustainable. Increasing the tax burden on those who are already contributing is not the answer. Instead, tax reform must prioritize social equity and long-term national stability.
So, my sound advice to you, Mr. Prime Minister: Please do not listen to the World Bank.
Amir Al Fateh is a content creator under the Newswav Creator programme, where you get to express yourself, be a citizen journalist, and at the same time monetize your content & reach millions of users on Newswav. Log in to creator.newswav.com and become a Newswav Creator now!
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