PETALING JAYA: With the cost of essentials such as food, housing and healthcare continuing to rise, calls are growing to raise the individual income tax relief threshold of RM9,000, which has remained unchanged since 2010.
Stakeholder groups said the current threshold is out of touch with today’s cost of living and should be increased to at least RM12,000 to reflect inflation.
They also urged clearer and more meaningful tax recognition for single taxpayers supporting elderly parents, as Malaysia moves towards an ageing society.
Financial Planning Association of Malaysia president Alvin Tan said the RM9,000 individual tax relief has lost much of its impact over time.
“While it once provided moderate support, the rising costs of essentials such as food, housing, healthcare, and education have significantly eroded its real value.
“Many households no longer see this relief as a meaningful buffer against financial pressure,” he said.
Tan noted that the impact is particularly acute for single individuals who bear all living costs on one income.
“These individuals manage rent or housing loans, utilities, insurance, and daily expenses independently, yet the relief structure does not adequately reflect their financial realities.
“Tax policy must remain inclusive as household structures evolve,” he said.
Tan said it is timely to review personal tax reliefs to ensure they remain realistic and relevant amid persistent inflation and stagnant wage growth.
Higher personal relief, he added, could strengthen long-term financial stability, particularly for middle-income households.
“For those caring for elderly parents or dependants, even modest tax savings can ease day-to-day pressure and improve preparedness for emergencies,” he said.
Federation of Malaysian Consumers Associations chief executive officer Saravanan Thambirajah said the RM9,000 relief has remained unchanged for nearly 15 years, despite broad-based price increases across essential sectors.
“Taxpayers today receive far less support than they did in 2010. There should be a substantial upward revision and a mechanism for periodic reviews so reliefs do not remain static while living costs rise,” he said.
He added that when tax relief fails to keep pace with inflation, disposable income shrinks, putting additional pressure on households already squeezed by rising expenses.
“This weakens household financial resilience and increases vulnerability to debt,” Saravanan said.
He also called for clearer tax recognition for single individuals caring for elderly parents, noting that elder care costs have risen sharply, particularly healthcare and insurance.
“For example, a medical insurance premium of about RM3,000 at age 64 can jump to around RM11,000 once a person turns 65. This is a heavy burden regardless of marital status,” he said.
As tax policy continues to be shaped around traditional household models despite shifting demographics, Saravanan said policies must evolve as Malaysia becomes an ageing nation.
Economist and policy specialist Dr Geoffrey Williams said that if personal tax relief had been index-linked to inflation, it would now stand at RM12,240.
“This is known as fiscal drag, where incomes rise but thresholds do not, automatically pulling more people into the tax net,” he said.
Williams noted that raising the personal tax threshold would not necessarily reduce government revenue, as many taxpayers’ incomes tend to grow faster than any modest increase in relief.
“Raising the threshold leaves more money in people’s wallets, which supports spending and economic growth. It is also progressive, as it removes lower-income earners from tax and targets higher-income groups,” he said.
He added that Malaysia’s effective threshold of about US$2,250 (RM9,109) is low compared to many Asean countries, affecting both tax competitiveness and disposable income.
Williams cautioned, however, against overly complex tax reliefs based on demographic categories, saying tax policy should primarily be anchored on income rather than personal or household choices.
“In Malaysia, where informal work is rising and income tax collection is challenged by low wages and tax avoidance, greater emphasis may be needed on consumption-based taxes instead of income taxes,” he said.
Any upward revision of the personal tax threshold, he added, should be accompanied by broader revenue measures.
“One alternative is an e-payments tax (EPT), a small levy on electronic transactions and e-commerce purchases. A 1% EPT could raise RM28.8bil, helping offset revenue losses from a higher income tax threshold,” he said.
