KUALA LUMPUR: Maintaining fuel subsidies will shield Malaysians from the ongoing global oil crisis, but the government must urgently identify new revenue streams and address “hidden double taxation” within the current tax system, says a think tank.
Institute of Strategic Analysis and Policy Research (Insap) director Woon King Chai said Putrajaya is currently caught in a fiscal trap, but warned that removing the RON95 subsidy at this juncture would be disastrous for the public.
Instead, he proposed increasing assistance to cushion the inflationary impact, including an immediate monthly crisis cash transfer of RM200 for B40 households and RM150 for the lower M40 group for a year.
To fund this safety net and ensure economic resilience, Woon said the government must rationalise the Sales and Service Tax (SST) structure to reduce cascading cost effects throughout supply chains, which effectively act as a form of hidden double taxation on consumers.
At the same time, he urged the government to begin institutional preparations and conduct a 12-month public consultation to reintroduce the Goods and Services Tax (GST) at 5%.
Speaking at a press conference at Wisma MCA, Woon said Insap estimates that a 5% GST could generate about RM77bil in annual revenue, resulting in a RM6.1bil structural surplus even after funding the proposed cash transfers and supporting SMEs through the transition.
He cautioned that the current fuel subsidy trajectory is financially unsustainable, with the monthly bill rising sharply from RM700mil in January to an estimated RM7bil in April, effectively exhausting the full-year allocation of RM8.4bil within just four months.
Describing the Strait of Hormuz disruption as the largest in the history of the global oil market, Woon warned that a second wave of inflation is already building upstream.
He noted that fertiliser prices are expected to rise by 15% to 20%, while animal feed costs could increase by about 8%, pressures that are likely to be felt in consumer food prices by the third and fourth quarters of the year.
While Insap commended the government’s targeted Budi Agri-Komoditi and Budi Diesel Individu programmes as constructive, Woon pointed out that they currently benefit only about 350,000 recipients.
“The Budi programmes may protect diesel users, but they do not protect households that do not own diesel vehicles yet still face higher food prices, as every truck, tractor, fishing vessel and delivery vehicle in the supply chain runs on diesel.
“Calls for work-from-home arrangements are demand-side measures that do not address the supply-side cost pressures that ultimately reach the dinner table,” he said, adding that some 4.92 million households are exposed to the inflationary effects of the crisis.
Woon also called on the government to commission a formal feasibility study for a Malaysian Strategic Petroleum Reserve within 90 days.
“The 1973 crisis led to the establishment of PETRONAS, creating a sovereign petroleum framework that has served Malaysia for five decades.
“Likewise, we should seize this 2026 crisis as an opportunity to build institutions and a revenue architecture that will serve Malaysia for generations to come,” he said.
Global oil markets have been thrown into turmoil following disruptions to shipping through the Strait of Hormuz, triggered by the conflict in the Middle East.
As of yesterday, Brent crude was trading at about US$95 per barrel, up from around US$72 prior to the conflict.
