Kuala Lumpur:A refined sales and services tax (SST) system with measures to minimize tax cascading, broaden the tax base, and strengthen compliance could create a more neutral and efficient tax environment for businesses, according to EY Malaysia's Tax Managing Partner Farah Rosley.
According to BERNAMA News Agency, targeted business-to-business reliefs and refinements to existing exemption mechanisms could reduce tax costs within supply chains while maintaining SST as a tax on final consumption. Farah emphasized the need for clear policy guidance, adequate consultation, and a sufficient transition period for any changes, stressing the importance of simplicity, ease of compliance, and certainty for taxpayers in the reform process.
Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim is set to present Budget 2027 at Parliament on October 9. Farah noted that a well-designed SST framework addressing current business challenges could support the government's fiscal reform agenda and contribute to Malaysia's long-term economic growth.
On August 18, Anwar mentioned the government's openness to studying a proposal to blend GST elements with SST for a more progressive tax system, while retaining SST as the national system with potential GST features.
Farah also highlighted expectations for Budget 2027, including targeted tax policies and fiscal measures to encourage investment in strategic areas crucial for Malaysia's development. This aligns with the New Incentive Framework (NIF), promoting incentives that drive measurable economic value creation.
In the context of a rapidly evolving digital economy, Budget 2027 might introduce or enhance tax incentives for advanced technologies like AI, automation, cloud computing, cybersecurity, and data analytics. These measures aim to boost productivity, foster innovation, and enhance competitiveness domestically and internationally.
Support for small and medium enterprises (SMEs) remains vital for a comprehensive digital transformation. Farah anticipates continued targeted tax incentives for strategic industries and high-value economic activities in Budget 2027, including research and development support and initiatives for technology commercialization.
Efforts to strengthen tax governance, transparency, and compliance are expected to persist, with initiatives like e-Invoicing, tax identification numbers, data matching, and analytics improving economic activity visibility and enhancing revenue collection.