The federal government revenue is estimated to increase by 4.7% to RM380.8bil on the assumption of resilient albeit moderating economic growth.
The higher estimate is mainly contributed by tax revenue which is projected to grow 5.8% to RM297.1bil with a share of 78% of total revenue or 12.8% of gross domestic product (GDP).
Meanwhile, non-tax revenue is anticipated to grow marginally by 1.1% to RM83.7bil, or 3.6% of GDP.
Direct tax is forecast to increase by 4.6% to RM199.9bil, or 67.3% of total tax revenue, on the back of improved income tax collection.
The largest component in direct tax, which is Companies Income Tax or CITA, constituting 53.3% of total direct tax, is expected to grow by 4.8% to RM106.6bil.
Individual income tax is estimated to increase by 6.2% to RM51.8bil in anticipation of continuous wage growth and low unemployment rate.
Greater enforcement and audit on taxpayers prior to the e-Invoice implementation are able to positively contribute to the higher collection. The other direct tax component, namely, stamp duty is expected to increase by 5.6% to RM12.4bil in tandem with the gradual transition to the stamp duty self-assessment system, particularly for property transfer instruments effective Jan 1, 2027.
Moreover, this digitalisation shift, accompanied by better enforcement is expected to enhance tax compliance.
Meanwhile, Petroleum (Income Tax) Act 1967 or PITA is expected to remain stable at RM20.5bil. Indirect tax collection is estimated to grow further by 8.3% to RM97.2bil, driven by steady business and consumption activities.
The main contributor to the indirect tax collection is the sales and service tax (SST) at RM73.3bil or 3.2% of GDP. Of this total, the sales tax and service tax are forecast higher at RM30.9bil and RM42.4bil, respectively. The higher SST estimates by 9.5% is in tandem with sustained performance of private consumption, in anticipation of major events to be held in 2027, including the Visit Malaysia 2026-2027 as well as the 34th SEA Games, which will be hosted by Malaysia.
Meanwhile, excise duty collection is estimated to remain steady at RM11.8bil due to the extension of duty exemption on locally assembled electric vehicles until the end of 2027.
Non-tax revenue is projected to increase marginally by 1.1% to RM83.7bil from investment income and non-revenue receipts. Investment income will be largely supported by contributions from Petroliam Nasional Bhd (PETRONAS) (RM32bil), Bank Negara Malaysia (RM7bil) and Khazanah Nasional Bhd (RM3bil).
Furthermore, the government also anticipates sustained contribution from the Retirement Fund Inc or KWAP amounting to RM6bil to partly finance the retirement charges. In addition, licences and permits are projected to rise to RM17.2bil, primarily driven by higher petroleum royalties amounting to RM6.7bil. Receipts from motor vehicles licences and levy on foreign workers are expected to register at RM3.3bil and RM3.7bil, respectively.
While the average global crude oil price should continue to remain stable in 2027, petroleum-related revenue is expected at RM61.2bil or 16.1% of total revenue, on account of a higher dividend from PETRONAS.
Likewise, non-petroleum revenue is estimated to increase by 3.5% to RM319.6bil, demonstrating that major reforms in recent years continue to broaden the tax base, resulting in the gradual improvement of revenue generation capability in the medium term.
The government is advancing efforts toward the publication of the Tax Expenditure Statement, which will enhance transparency and accountability in the management of tax expenditures, while aligning with international best practices.
In essence, robust governance, policy certainty and predictability remain crucial to complement efforts in enhancing tax compliance and revenue optimisation, thereby strengthening fiscal sustainability and ensuring the fiscal framework remains resilient and responsive to future economic shocks.
