Kuala lumpur: Malaysia's immediate priority right now is to raise people's incomes and address the country's structural wage issue before broadening the tax base, Economy Minister Akmal Nasrullah Mohd Nasir said. He emphasised the importance of addressing wage issues as a precursor to any tax reforms, responding to the Organisation for Economic Co-operation and Development's (OECD) recommendations for tax system reform, including the reintroduction of a broad-based consumption tax and broadening the personal income tax base.
According to BERNAMA News Agency, Akmal Nasrullah highlighted that only about 15 per cent of Malaysia's workforce currently falls within the personal income tax net, as reported in the OECD Economic Survey of Malaysia. He stressed the need for increased incomes to ensure any new taxation measures would not adversely impact consumer spending or earnings. While acknowledging the OECD's perspective, Akmal stated that the primary focus for Malaysia should be on comprehensively addressing the wage issue.
Akmal also addressed questions on the sufficiency of the expansion of the sales and services tax (SST) in increasing government revenue and achieving fiscal consolidation targets. He noted that salary issues remain a structural problem that requires prioritised attention. He advocated for the courage to tackle salary issues, which are crucial before considering expanded tax measures that do not hinder economic growth.
Meanwhile, OECD Director of Country Studies Dr Luiz de Mello remarked on the survey's identification of various options to aid Malaysia in achieving its fiscal consolidation targets. Dr de Mello noted Malaysia's ambition to reduce its fiscal deficit to three per cent by 2028 and stabilise debt below 60 per cent of GDP over the longer term. The survey proposed options on both spending and revenue fronts, including the gradual reduction of fossil fuel subsidies to safeguard public finances while protecting vulnerable households.
Dr de Mello also acknowledged Malaysia's decision to refrain from focusing on value-added tax at this moment, respecting its strategy while engaging in policy dialogue to explore various fiscal options.