Budget 2025 Is Coming, What Do The Experts Want To See?

The prime minister had recently shared his preview of what is in store for the upcoming Budget 2025.

“With optimism, I anticipate that during the budget presentation on October 18, further enhancements to the economic framework will be unveiled, aiming to facilitate a more equitable distribution of accelerated economic growth among a wider population,” he wrote on X.

As you might already know, the government has set the tabling of Budget 2025 to be happening on the 18th of October next week.

So before the government tables their vision of Malaysia’s finances for the next year, let’s have a look at what the experts are expecting to see in Budget 2025.

What did Budget 2024 introduce?

Before we can get into what the experts expect to see from Budget 2025, let’s have a look at Budget 2024, and what they did right.

According to Andrew Lim of the Association of Chartered Certified Accountants (ACCA), Budget 2024 introduced several impactful measures aimed at economic recovery and future growth, which includes;

Support for SMEs

SMEs got a big boost in Budget 2024 with the RM10 billion SME Digitalisation and Automation Matching Grant, which helped them to adopt advanced technologies which in turn enhanced productivity and competitiveness.

Sustainability effort

Budget 2024 also made great strides towards the sustainability agenda of Malaysia, introducing incentives for green investments, renewable energy projects, and the development of low-carbon cities.

Youth empowerment

The youth also got a significant injection of funds dedicated to their empowerment, with initiatives such as the allocation of RM500 million for upskilling and reskilling programmes.

Budget 2024 also introduced other groundbreaking moves, such as the rationalisation of subsidies, introducing new taxes, and giving multiple industries a much-needed boost.

And generally, Budget 2024 was seen as a very good framework provided by the Madani government to improve Malaysia’s economy.

But for Budget 2025, what does the government need to do to build on the good work already done? Let’s hear from the experts, and see what they think.

Taxes a big point of contention

If there is one thing that a lot of experts agree on when it comes to Budget 2025, is that taxes will be a huge point of contention and that there are significant reforms needed on taxes.

Chartered Tax Institute of Malaysia (CTIM) president Soh Lian Seng says that a progressive tax system that reduces leakages and enhances compliance will be crucial to expanding the tax base in a sustainable way.

In a report from New Straits Times, Soh stated that while Budget 2024 did introduce several tax initiatives, it should be enhanced.

Further clarification on scope of e-invoicing needed

One of them is the scope of e-invoicing, which Soh said must be continuously clarified, ensuring businesses can capture all relevant transactions.

Soh also stated that the substance-based capital gains tax exemption, which is currently limited to three years should be made a permanent fixture, while also proposing the government to hold a study to determine whether a household-based model is better suited compared to the current individual-income based model.

Enhance personal tax reliefs due to rising costs

“The personal relief for individuals (currently RM9,000) and dependents, including reliefs for medical treatment for parents, spouses and disabled individuals needs to be reviewed to better reflect the rising cost of living.

“Particularly, the relief for disabled individuals (fixed at RM6,000 since 2005) requires immediate revision, with CTIM proposing that this be doubled to mirror current economic realities,” Soh added.

Meanwhile, ACCA also stated that Budget 2025 should introduce a revamp of the tax system, saying that a simplified tax system is crucial to improve compliance while also supporting business growth. This move in particular will be of great benefit to SMEs.

ACCA also believes that the government should expand the tax base to include the digital economy, as this will ensure multinational tech companies contribute fairly to national revenues.

Is it finally time for GST?

In the lead up to Budget 2024, the streets were rife with speculation that the government will reintroduce the Goods and Services Tax (GST). The speculation was fueled by experts saying that the removal of GST was a mistake, as it was a fairer and more efficient taxation system.

So now that Budget 2025 is around the corner, are experts expecting GST to be reintroduced?

The answer is again; yes and no.

GST is the solution – CGS

CGS International stated in a recent news report that GST is the solution to many of the fiscal problems that the government is facing.

“”We still think GST is a solution to many of the government’s fiscal problems. We estimate government debt to remain elevated at 62 per cent of gross domestic product (GDP) this year, close to the 65 per cent debt limit.

“With the Fiscal Responsibility Act passed last year explicitly stating that the debt-to-GDP ratio should not exceed 60 per cent in the medium term (three to five years), a strategy to ensure reliable and permanent revenue enhancement is needed,” CGS International said.

GST, RON95 subsidy removal or enhance SST

CGS International stated that there are three scenarios that can happen in the budget. It’s either the government reintroducing the GST, cut RON95 fuel subsidy; or enhance other taxes (such as Sales and Service Tax).

However, they also said that it is very unlikely that the first two options can happen together, and also that the second option is very ‘politically unpalatable’.

The bank-supported research firm also highlighted that reintroducing GST 2.0 at a 4 percent rate would be in line with the recommendations from the National Chamber of Commerce and Industry of Malaysia (NCCIM) and the Federation of Malaysian Manufacturers (FMM).

However, other experts have been quoted by media reports to downplay the probability of GST being reintroduced. The main reason being the current ruling government is controlled by the same parties that abolished GST when it came to power in 2018.

What else can we expect to see from Budget 2025?

Other things that analysts and experts expect to see from Budget 2025 include measures to boost the digital economy. This move will encourage businesses to invest in digital technologies without facing heavy financial burdens.

Tax expert Datuk Harjit Singh Sidhu, CEO of HSS Advisory, stated that the budget should build upon existing legislation allowing SMEs to claim Accelerated Capital Allowances (ACA) for digitalisation-related expenses without asset value limitations.

Tax incentives for digitalisation-related expenses

“The lifespan of the hardware and software businesses use is short and needs changing or upgrading in a few years,” Harjit told Malay Mail in a recent interview.

“For SMEs, ACA allows them to claim their investments in IT equipment, such as computers and software, within two years. This makes investing in technology far more appealing because businesses can recover costs quickly.”

Harjit is also a strong proponent of increasing the personal tax relief for IT purchases, as he believes that the current cap of RM2500 is insufficient, given that the costs for technology are always rising.

What do you want to see from Budget 2025?

So there you have it, those are the things experts are expecting from Budget 2025. What do you think? And what would you like to see from Budget 2025?

Follow our Budget 2025 coverage here.