Kuala lumpur: Salary increases, along with the expansion of recipients and higher allocations under the public assistance programme, are expected to cushion the short-term impact of rising prices following the expansion of the Sales and Service Tax (SST). This is particularly relevant as the government undertakes aggressive efforts to raise the country’s economic ceiling.

According to BERNAMA News Agency, Director of the Master of Business Administration Programme at Putra Business School, Associate Professor Dr. Ahmed Razman Abdul Latiff, emphasized that the exemption of SST on essential goods helps ensure that the bottom 40 per cent (B40) income group is not significantly affected by the higher cost of living. The price increases primarily impact premium and imported goods, which are rarely consumed by this group. He also highlighted that basic necessities are under price control, and government assistance programmes, including the Sumbangan Asas Rahmah (SARA) and Sumbangan Tunai Rahmah (STR), continue to provide fiscal support for the B40 group. Dr. Ahmed Razman urged consumers to report traders exploiting tax changes to impose excessive price hikes, aligning with the Price Control and Anti-Profiteering Act.

Meanwhile, Universiti Utara Malaysia’s School of Economics, Finance and Banking senior lecturer Muhammad Ridhuan Bos Abdullah noted that from an economic theory perspective, any new tax will inevitably impact both producers and end consumers. Although the MADANI government may have conducted a cost-benefit analysis, the short-term effects may not be fully mitigated, especially regarding the magnitude and impact of the tax. These can only be accurately assessed after one to three years of implementation. He added that economic stability is crucial for sustained development and that efficient tax collection allows the government to stabilize the economy.

Malaysia’s ongoing economic reform involves structural adjustments, with fiscal tools such as the SST being essential to achieving national income redistribution objectives. The government has decided to raise the minimum wage to RM1,700, effective February 1, 2025, benefiting 4.37 million workers. Furthermore, civil servant salary increases in 2025 and 2026 are part of the Public Service Remuneration System (SSPA), implemented in two phases, with the second phase starting in January 2026.

For 2025, the government has allocated RM13 billion under SARA and STR, the highest amount ever distributed for cash assistance, compared to RM10 billion last year. The number of recipients has significantly increased from 700,000 to 5.4 million individuals. Other forms of assistance disbursed include the 2025 Student Education Assistance, Federal Territory General Assistance, MADANI e-Wallet and e-Belia Rahmah programmes, 2025 Hari Raya Aid, and the 2025 Civil Servants Raya Bonus.