Tax Relief Can Stimulate Domestic Spending – Economists
KUALA LUMPUR, Oct 11 (Bernama) -- The move to raise the individual tax relief limit to RM12,000 and lower income tax rates in Budget 2027 has the potential to stimulate domestic spending and support the country’s economic growth, economists said.
Universiti Kebangsaan Malaysia (UKM) Faculty of Economics and Management senior lecturer Associate Professor Dr Mustazar Mansur said tax cuts would give households more room to spend on necessities such as housing, education, healthcare and food.
He said the middle-income group, or M40, would benefit from the expanded tax relief, which covers expenses such as the care of parents and grandparents, tuition fees and the purchase of sports shoes.
“The additional disposable income resulting from these tax reductions will give them more room to spend and indirectly boost domestic consumption, thereby contributing to economic growth,” he told Bernama.
Prime Minister Datuk Seri Anwar Ibrahim, who is also Finance Minister, when tabling Budget 2027 at the Dewan Rakyat on Friday, announced a raise in the individual tax relief limit from RM9,000 to RM12,000, as well as reductions in tax rates applicable to chargeable income of between RM70,000 and RM100,000 to 18 per cent and to 24 per cent for chargeable income of between RM100,000 and RM150,000.
The government has also expanded tax relief to cover postnatal care, children’s tuition, artificial intelligence (AI) subscriptions, as well as the cost of vaccinating and adopting pets from registered centres.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said raising the individual tax relief limit, which had remained unchanged since 2010, was a timely move given the rising cost of living.
He said the measure could help ease the financial burden on middle-income households facing rising costs of housing, education and family care.
“With the cost of living continuing to rise, this tax relief will help increase disposable income, particularly among the M40 group,” he said.
Federation of Malaysian Consumers Associations (FOMCA) chief executive officer Dr Saravanan Thambirajah also welcomed the increase in the individual tax relief limit and reduction in tax rates, which could reduce tax liabilities and increase the disposable income of eligible taxpayers.
“Although the increase in tax relief can help ease the people’s financial burden, we believe it is not a comprehensive solution, as education, childcare, healthcare, medical insurance and housing costs remain major financial commitments for M40 families.
“As such, the government should continue to strengthen the provision of quality and affordable public services, including access to efficient government hospitals, reliable public transport and reasonably priced childcare facilities.”
For Muhamad Ilham Nordin, an Administrative and Diplomatic Officer at the Ministry of Transport in Putrajaya, the expanded tax relief, particularly for AI subscriptions and sports shoe purchases, is relevant to the current needs of people like him in the M40 group.
“Tax relief for AI subscriptions, for example, is very helpful in enabling me to continue improving my productivity, while also creating opportunities to earn supplementary income in the digital economy. Tax relief for sports shoes is also beneficial as it can encourage a healthier lifestyle, particularly in Putrajaya, which has many public recreational parks,” he said.
Muhamad Ilham earns a net monthly income of over RM4,000, while his wife, who works as a private kindergarten teacher, earns a net salary of RM2,000.
He said transport costs remained one of his family’s major financial commitments, including vehicle installments, fuel, maintenance and parking.
“I would therefore like to suggest that the government consider vehicle maintenance rebates or subsidies to help households that rely on private vehicles,” he said.
-- BERNAMA