Budget 2027: What are we expecting?

WITH Budget 2027 set to be unveiled soon, it is likely to be the final budget tabled before the next general election.

Going by past practice, it could well be a “sweetener budget”, with more people-centric and business-friendly measures expected.

It is also unlikely to introduce any new taxes, given the risk of a backlash from the public and business community.

Prime Minister (PM) and Finance Minister Datuk Seri Anwar Ibrahim has already indicated that the budget will ease the financial burden on the middle 40% income (M40) group.

In recent months, the government has announced several measures to help the people, including adjusting the petrol subsidy allocation to 300 litres, allowing diesel subsidies to be transferred and raising the monthly electricity consumption threshold for subsidies from 600kWh to 800kWh from September to December 2026.

We can also expect the government to strengthen Bantuan Rahmah to help households cope with the rising cost of living.

At the same time, the PM has reiterated that the government will not reintroduce the goods and services tax (GST), but will optimise the sales and service tax or SST, incorporating some strengths of the GST framework into the existing system.

I have previously discussed the concerns and suggestions surrounding such a hybrid tax system, so I will not repeat them here. Our position remains that any adjustment or change must first go through proper consultation, with clear rules and timelines.

The system must also simplify administrative and compliance requirements for micro, small and medium enterprises (MSMEs), rather than add to their costs.

For businesses, the key concerns remain operating costs and taxation.

Under the Minimum Wages Order, the current RM1,700 minimum wage must be reviewed next year.

The Malaysian Trades Union Congress recently proposed raising it to RM3,100 to keep pace with the rising cost of living.

The size of the proposed increase has understandably sparked strong reactions.

When determining the minimum wage, however, the government must look beyond the cost of living and consider the overall wage structure.

Pay should be linked to factors such as qualifications, experience, responsibilities and productivity. Productivity is particularly important.

If wage increases are not matched by improvements in productivity, businesses that cannot absorb the higher costs may eventually have to retrench workers or even shut down.

In such a situation, no minimum wage, however high, can solve the underlying problem. Tax refunds remain another longstanding concern for both businesses and the government. From the government’s perspective, officials want to ensure that the amount being refunded is accurate before making payment.

But when businesses have overpaid taxes and the refunds are delayed, their cash flow can be directly affected.

Apart from considering a “refund first, audit later” approach, a potentially more efficient option would be for the government to introduce a tax credit system.

Businesses could use previously overpaid taxes to offset future tax liabilities.

This would prevent cash from being tied up unnecessarily while also removing the need for the government to refund tax revenue that it has already collected.

On corporate income tax, the government should consider reviewing the tax thresholds for SMEs.

Currently, the first RM150,000 of chargeable income is taxed at 15%, while income from RM150,001 to RM600,000 is taxed at 17%. This could be further revised so that the first RM1mil of chargeable income is taxed at a uniform 15%.

To encourage entrepreneurship, countries such as Australia, Canada, Singapore and the United Arab Emirates offer tax rebates or other incentives to new businesses. Malaysia could consider similar measures, giving new enterprises more cash flow to grow their businesses or invest in research and development (R&D).

In recent years, government support for MSMEs has focused largely on boosting productivity, strengthening automation and digitalisation, and increasing exports.

We expect Budget 2027 to continue in this direction, encouraging MSMEs to adopt artificial intelligence (AI) and automation to improve productivity and competitiveness.

However, when we talk about such assistance, the manufacturing sector often receives much of the attention.

The services sector, which contributes more than 60% of Malaysia’s gross domestic product, should also be encouraged to adopt AI to reduce reliance on manpower and improve service efficiency.

The Market Development Grant has been an effective form of assistance for SMEs seeking to expand overseas.

However, it has frequently faced funding constraints in recent years.

The government should increase its allocation and raise the lifetime ceiling for each company from RM300,000 to RM1mil.

The ceiling for individual applications to participate in local and overseas trade fairs should also be increased to ease the financial burden of developing international markets.

Recently, the Associated Chinese Chambers of Commerce and Industry of Malaysia hosted the UK’s Parliamentary Under-Secretary of State (Small Business and Enterprise Minister) Lord Leong CBE.

Discussions covered the challenges faced by SMEs and the various forms of government assistance available.

One point raised during the exchange is worth considering.

Britain is set to introduce legislation requiring businesses that trade with small companies to settle their payments within 60 days. This could go a long way towards easing cash-flow problems faced by small businesses.

Malaysia could consider a similar law to prevent businesses, particularly cash-strapped micro- enterprises, from getting caught in a vicious cycle where they have secured orders but cannot collect payment on time, leaving them unable to pay their suppliers and ultimately creating cash-flow problems throughout the supply chain.

Government support for MSMEs should not be limited to tax incentives, exemptions, grants or low-interest loans.

It can also include legal safeguards such as those mentioned above, as well as more efficient platforms to help MSMEs improve their products through R&D and compete internationally.

The government should also act as a bridge between businesses and institutions of higher learning, enabling companies to collaborate with universities on R&D.

Agencies such as the Malaysia Productivity Corp and Sirim Bhd should be brought into a more integrated ecosystem, allowing these government institutions to provide more effective assistance to SMEs in R&D, improving efficiency and developing internationally competitive products and services.

This is how we can help Malaysian brands with strong potential make their mark on the international stage.

As for personal income tax, we hope the government will consider lowering individual tax rates so that the M40 group has more disposable income.

We also expect higher personal tax exemptions and household-related relief, particularly for medical expenses.

To improve employability, the government should also consider increasing tax relief for education and skills training.

As for the RM100 Sumbangan Asas Rahmah assistance, which has been automatically given twice to all citizens aged 18 and above, we hope future assistance will be more targeted so that those who genuinely need help receive greater support and resources can be concentrated on the most vulnerable groups.

Beyond this wish list, what else will Budget 2027 bring? And just how sweet will it be? We will have to wait and see.

Datuk Koong Lin Loong is managing partner at Reanda LLKG International, as well as treasurer general cum chairman of the SME Committee at the Associated Chinese Chambers of Commerce and Industry of Malaysia. The views expressed here are the writer’s own.