The shift toward data-driven delivery, digital governance, and transparent monitoring can make a real difference.
BUDGET 2026 is tightening the government’s belt by aiming to bring the deficit down to 3.5% of gross domestic product (GDP).
This shows the government’s commitment to fiscal discipline in line with the Public Finance and Fiscal Responsibility Act 2023, which mandates bringing down the deficit to 3% by 2028.
It signals to investors that Malaysia is serious about managing debt and ensuring long-term stability.
At the same time, a balance is being struck by providing continued support for the rakyat through targeted aid as well as development spending (that has a high multiplier effect on the economy).
The goal is not overt austerity, but smart spending by ensuring every ringgit spent drives growth and benefits people directly.
Having effective subsidy retargeting, better procurement efficiency, and curbing leakages will be critical to showcase Malaysia’s resilience and maintain investor confidence.
Choosing fiscal discipline during uncertain global times especially with US tariffs and external headwinds reflects a focus on resilience over short-term gain.
Malaysia is opting for structural reforms to strengthen its fundamentals: diversifying the economy, improving tax efficiency, and reducing dependence on subsidies.
The nationwide rollout of e-invoicing and the self-assessment system for stamp duty will modernise Malaysia’s tax system.
For small and medium enterprises, it might feel like an adjustment at first, but over time it will reduce paperwork, improve transparency, and make compliance easier.
For the government, these digital tools broaden the tax base without introducing new taxes – ensuring more accurate reporting and closing loopholes.
Malaysia’s first-ever carbon tax is a major policy shift. Readiness will depend on industry adaptation and the capacity of the tax administration.
The initial focus on energy-intensive sectors like iron and steel is a smart, phased approach.
However, industries will need clear guidelines, measurement frameworks, and incentives for emission reduction.
This is not just a revenue tool, it’s a push for green transition and aligning with environmental, social and governance standards, which is critical for competitiveness in global trade.
Many export-oriented industries may be price-sensitive; a carbon tax may erode global competitiveness if peers do not match it or if border adjustments are absent.
Tax exemptions for tour operators and international event organisers are timely. With Visit Malaysia Year 2026 approaching, these incentives can help rebuild the tourism and MICE (meetings, incentives, conferences, exhibitions) sectors that were hit hard by the pandemic.
It’s a signal that Malaysia is serious about reviving services exports and positioning itself as a regional tourism and events hub again.
The Health Ministry has been allocated RM46.5bil. There have been numerous calls for higher public healthcare spending as a percentage of GDP.
The Malaysian Medical Association has been proposing that spending be increased to 5% from the current 2.4% to better sustain healthcare reforms and handle rising costs. Most developed nations have 5% of the GDP as the desired level of public healthcare spending.
Notably, Budget 2026 takes into account the plight of contract doctors as 4,500 contract doctors are to be made permanent in 2026.
There have in fact been ongoing efforts in the past to convert the status of contract doctors to permanent positions but there have been transparency and bureaucracy issues.
There are serious calls for the contract doctor scheme to be discontinued and to revert to having permanent positions for doctors from the inception of their employment as was the case about 10 years ago.
Contract doctors face issues with job securities, affecting their ability to purchase houses and not to mention the morale issues faced. A noble profession is now being shunned by many as there are many challenges faced by entrants into this profession.
Excise duties on alcohol and tobacco are going up sharply – the first such increase in almost a decade.
While higher excise duties can boost revenue, the challenge lies in enforcement and border control.
Without strong anti-smuggling measures, higher prices could drive black-market activity.
So, it’s about balance – combining tax increases with tighter monitoring and public awareness.
If implemented well, these measures can improve health outcomes and revenue collection.
Significant increase in sin taxes have seen excellent results in terms of lowering of the consumption levels in Australia and New Zealand.
Australia’s rate of tobacco excise climbed from 19 Australian cents per cigarette in 1999 to A$1.16 in recent years, and will climb again by 5% per year for now in addition to normal indexation.
Over that time the proportion of Australians aged 14 and over who smoke daily plummeted from 22% to 11%.
The Australian government says it wants to get it below 10% by the end of 2025 and to 5% by 2030.
New Zealand had gone even further with its “Smokefree 2025” policy, with a goal that by 2025, fewer than 5% of New Zealanders will be smokers. This strategy includes banning the sale of tobacco products to anyone born after Jan 1, 2009.
Every budget looks good on paper but execution is key.
What gives confidence this time is that many Budget 2026 measures are targeted, digital, and reform-driven, and not just one-off allocations.
The shift toward data-driven delivery, digital governance, and transparent monitoring can make a real difference.
If the government maintains this momentum and accountability, these measures can truly translate into impact for businesses, and ultimately for the rakyat.
Harvindar Singh is a council member for the Chartered Tax Institute of Malaysia and tax partner for SCS Global Consulting (M) Sdn Bhd. The views expressed here are the writer’s own.
