AS we move beyond the two-thirds mark of 2026, attention is naturally beginning to turn towards Malaysia’s next national budget.
According to the Parliamentary calendar, Budget 2027 is expected to be tabled on Oct 9 later this year, giving policymakers less than three months to refine the measures that will shape Malaysia’s economic and fiscal direction for the coming year.
At this juncture, it is the time to bring out the “crystal ball” again and take stock of the developments that have unfolded over the past eight months, particularly in taxation, fiscal reform and economic transformation, and looking ahead to measures that may feature in the upcoming Budget.
Looking back: Budget 2026
Budget 2026 was tabled under the theme Belanjawan Madani Keempat: Belanjawan Rakyat (The Fourth Madani Budget: The People’s Budget).
The budget sought to strike a balance between supporting the rakyat, encouraging economic growth and maintaining fiscal discipline.
A key feature of Budget 2026 was the government’s commitment to fiscal consolidation.
The fiscal deficit was targeted to narrow to 3.5% of gross domestic product in 2026, compared to 3.8% in 2025, reflecting continued efforts to strengthen public finances while maintaining necessary development spending.
Budget 2026 also continued to emphasise several key policy priorities like addressing cost-of-living concerns, accelerating digitalisation, supporting small and medium enterprises (SMEs), promoting environmental, social and governance (ESG) and sustainability initiatives.
The last budget also emphasised on strengthening tax administration through e-invoicing and enhanced compliance measures and advancing fiscal reform and governance.
While Budget 2026 has provided an important foundation, the theme for Budget 2027 has not yet been announced.
Nevertheless, several emerging trends suggest areas where further policy attention may be warranted.
What should Budget 2027 focus on?
As Malaysia looks towards Budget 2027, I am hopeful for the government to continue the focus on:
> Cost of living and support for the middle class.
> Ease of doing business.
> Encouraging voluntary compliance and good tax governance.
> Building a future-ready digital and artificial intelligence-skilled workforce.
These are areas that can simultaneously support the rakyat, improve business competitiveness and strengthen Malaysia’s fiscal sustainability.
> Cost of living: It is time to recognise the middle class.
Much of the government’s support in recent years has understandably focused on helping lower-income households manage economic pressures.
However, there is increasing evidence that the middle class is also feeling the strain.
Many middle-income families today face a combination of rising healthcare costs, childcare expenses, ageing parent responsibilities, housing commitments and growing education expenditures.
Increasingly, they are also part of the “sandwich generation”, supporting both children and elderly parents.
Budget 2027 could consider targeted measures to ease these pressures without compromising fiscal discipline.
Some possibilities include enhanced tax relief for elderly parent care, expanded tax incentives for long-term care and medical expenditure.
Further possibilities include additional tax deductions relating to childcare and dependent care and also greater support for retirement adequacy and private savings.
It should also include targeted incentives that encourage family well-being without creating broad-based fiscal leakages.
Such measures would acknowledge the growing responsibilities borne by working Malaysians while preserving targeted support for vulnerable groups.
> Ease of doing business: It is time to modernise stamp duty administration.
One area where businesses continue to seek greater certainty is stamp duty administration.
The Inland Revenue Board has made commendable progress in digitalising stamp duty processes.
The introduction of self-assessment and ongoing efforts to streamline administration represent important steps forward.
Nevertheless, opportunities remain.
Businesses continue to encounter situations where certain documents qualify for exemption but still require endorsement or administrative processing.
While such requirements may be necessary from a control perspective, removing unnecessary procedures could significantly reduce compliance costs and administrative burden.
More importantly, many taxpayers are eagerly awaiting further progress towards the simplification of the First Schedule of the Stamp Act 1949.
A simplified and modernised schedule would improve certainty, reduce interpretational disputes, lower compliance costs, facilitate voluntary compliance and also enhance Malaysia’s ease-of-doing-business environment.
Taxpayers generally do not object to paying the right amount of tax. What they seek is clarity, consistency and predictability.
Budget 2027 presents an opportunity to advance this important reform agenda.
> Voluntary compliance: Encourage more companies to embrace tax corporate governance.
The tax administration landscape is gradually evolving from one centred primarily on enforcement towards one that increasingly emphasises governance, transparency and trust.
This is where tax corporate governance (TCG) becomes increasingly relevant.
The challenge, however, is that many organisations, particularly SMEs and mid-sized companies, remain concerned about the implementation cost.
One practical solution would be to enhance tax incentives supporting the adoption of TCG frameworks.
Malaysia already provides deductions for certain governance-related expenditure. However, consideration could be given to increasing the current deduction limits, expanding qualifying expenditure categories, providing enhanced deductions for independent tax governance reviews and encouraging greater participation among SMEs.
This would not only promote voluntary compliance but also strengthen confidence between taxpayers and tax authorities.
Importantly, tax governance aligns closely with the “G” component of ESG.
Increasingly, investors, regulators and multinational groups view tax transparency and responsible tax practices as indicators of good corporate citizenship.
Encouraging wider adoption would therefore support both compliance and sustainability objectives.
> Beyond e-invoicing: Investing in AI, technology and human capital.
Malaysia has made significant progress in its digital tax transformation journey through e-invoicing. However, e-invoicing should not be viewed as the destination. Rather, it should be the starting point.
The next phase of Malaysia’s competitiveness journey depends on our ability to build a workforce equipped with skills in AI, data analytics, cybersecurity, automation, digital engineering and advanced technology solutions.
For individuals, the government could consider expanding existing education and upskilling reliefs to cover a broader range of future-ready skills programmes.
For businesses, especially SMEs, greater incentives could be provided through enhanced training grants, double deductions for AI and digital skills training and support for workforce transformation initiatives.
Incentives to adopt productivity-enhancing technologies and the long-term return on such investments may far exceed the initial fiscal cost through stronger productivity growth and higher-paying jobs.
> Exploring new approaches in the future for non-residents.
Another area that deserves study is the concept of presumptive taxation, which has been adopted in various forms by other jurisdictions, including India.
While Malaysia’s tax system differs significantly, examining international models that simplify compliance for specific categories of non-resident taxpayers may offer useful insights.
The objective would not necessarily be to replicate another country’s system, but rather to explore whether certain simplified mechanisms could reduce compliance costs, increase certainty and improve tax collection efficiency.
Any consideration would of course require careful consultation and detailed evaluation.
Looking ahead
Budget 2027 presents an opportunity to reinforce an important message: fiscal sustainability and people-centric growth are not mutually exclusive.
Malaysia must continue its fiscal consolidation journey. Fiscal discipline remains essential.
At the same time, the rakyat and businesses must continue to feel that economic reforms are designed not merely to improve government finances, but also to improve lives, create opportunities and strengthen confidence.
If Budget 2026 was about strengthening the foundations, perhaps Budget 2027 can focus on empowering Malaysians to thrive in a future defined by rapid technological change, greater global competition and evolving societal needs.
The best budgets are not necessarily those that spend the most. They are the ones that provide the certainty of act, the incentive to invest, and the foundations to build a more productive, trusted and future-ready Malaysia.
And that, perhaps, is the Budget 2027 that many Malaysians are hoping to see.
Soh Lian Seng, is head of tax for KPMG in Malaysia. The views expressed here are the writer’s own.
