Economist says the RM2,000 minimum wage “will disappoint many people working for MSMEs who are exempt” and calls for tax reliefs to be indexed
| IN BRIEF: Prof Geoffrey Williams: “most voters will be unimpressed” by Budget 2027. MSME workers exempt from the RM2,000 minimum wage “will leave for better paid jobs now”, he saysHigher tax relief “will not affect those on low income”; extra reliefs “piecemeal”Calls a 5% capped GST with a Retail Electronic Payments Tax (REPT) top-up “a good compromise”But says economic growth “is very strong” and will stay strong into 2027 |
By TENGKU NOOR SHAMSIAH TENGKU ABDULLAH
KUALA LUMPUR, Oct 11- Budget 2027 is “not an election winning budget” and “most voters will be unimpressed by it”, economist Prof Geoffrey Williams said, adding that the RM2,000 minimum wage “will disappoint many people working for MSMEs who are exempt”.
Williams, of Williams Business Consultancy, gave his assessment in response to questions from TNS News after Anwar tabled the budget in the Dewan Rakyat on Friday.
He said: “This is not an election winning budget and most voters will be unimpressed by it.”
MINIMUM WAGE: EXEMPTION CUTS BOTH WAYS
Prime Minister Datuk Seri Anwar Ibrahim, who is also Finance Minister, announced in Budget 2027 that the minimum wage will rise from RM1,700 to RM2,000 a month from June 2027, with micro, small and medium enterprises (MSMEs) with annual sales below RM50 million exempted.
Williams said: “The minimum wage hike to RM2,000 is expected but will disappoint many people working for MSMEs who are exempt. It will also make life difficult for MSMEs because their workers will leave for better paid jobs now.”
TAX RELIEF: WHO GAINS
The budget raises the individual tax relief threshold from RM9,000 to RM12,000, which Anwar said had not been reviewed since 2010, and cuts income tax by one percentage point to 18 per cent for chargeable income of RM70,001 to RM100,000 and 24 per cent for RM100,001 to RM150,000. The government says about five million taxpayers will gain up to RM1,600.
Williams said the higher individual tax relief “will help higher income earners but will not affect those on low income”.
He said: “The higher tax relief is mostly for higher income earners. It will be welcomed by people in that group but not so important otherwise.”
He added: “Personal tax reliefs should always be indexed otherwise people move into higher tax brackets just because they get a small increase in salary rather than a promotion. This tax-creep becomes a burden and a form of ‘hidden taxation.’”
Budget 2027 also widens several reliefs, to cover postpartum care, all care-related expenses for parents and grandparents, sports shoes, children’s tuition, AI software subscriptions, and pet vaccination and adoption from registered shelters.
Williams said: “The extra reliefs are piecemeal and not really enough to make much difference.”
GST AND SST
Anwar’s budget speech made no mention of the Goods and Services Tax (GST). Its consumption tax measures were targeted, such as cutting the service tax on elderly care services from 8 to 6 per cent from 1 January 2027 and allowing manufacturers to reclaim sales tax on machinery, spare parts and equipment bought from local traders.
Williams said: “It is not surprising that GST was not mentioned because Anwar is opposed to it. They have also announced a review of SST so that is not ready.”
He put forward an alternative: “Actually a good compromise is the Bersama suggestion of 5% GST capped with a top-up using a new Retail Electronic Payments Tax (REPT).”
Parti BERSAMA Malaysia’s shadow budget for 2027, authored by former Economy Minister Datuk Seri Rafizi Ramli and economist Sum Dek Joe, proposes reintroducing GST at 5 per cent with a binding cap at that rate for 10 years. It also proposes the REPT, a tax Williams has himself advocated, to be studied at a 0 per cent rate from 2027 to 2029 before being introduced at 0.5 per cent in 2030.
GROWTH STILL STRONG
On the economy, however, Williams said economic growth “is very strong and will continue to be strong into next year”.
The government projects growth of 4.8 to 5.3 per cent this year, after second-quarter growth of 6 per cent, and 4.2 to 5.2 per cent in 2027.
BUDGET AT A GLANCE
Budget 2027, the fifth under the MADANI government, has total resources of RM510 billion, up from RM470 billion this year. Cash aid under Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) rises to RM16 billion, and Malaysians aged 18 and above not on STR will receive RM100 on two occasions.
Some 1.3 million civil servants will receive a RM1,500 special payment and more than one million retirees RM750. The government expects the fiscal deficit to narrow from 3.6 per cent of gross domestic product (GDP) this year to 3.3 per cent in 2027.
- TNS NEWS