Where do your taxes go?

Free Malaysia Today

FMT takes a deep dive into how Malaysia provides much welfare despite having a narrow tax base.   Read More: https://www.freemalaysiatoday.com/category/nation/2025/07/04/explained-where-do-your-taxes-go    Free Malaysia Today is an independent, bi-lingual news portal with a focus on Malaysian current affairs.    Subscribe to our channel - http://bit.ly/2Qo08ry   ------------------------------------------------------------------------------------------------------------------------------------------------------ Check us out at https://www.freemalaysiatoday.com Follow FMT on Facebook: https://bit.ly/49JJoo5 Follow FMT on Dailymotion: https://bit.ly/2WGITHM Follow FMT on X: https://bit.ly/48zARSW  Follow FMT on Instagram: https://bit.ly/48Cq76h Follow FMT on TikTok : https://bit.ly/3uKuQFp Follow FMT Berita on TikTok: https://bit.ly/48vpnQG  Follow FMT Telegram - https://bit.ly/42VyzMX Follow FMT LinkedIn - https://bit.ly/42YytEb Follow FMT Lifestyle on Instagram: https://bit.ly/42WrsUj Follow FMT on WhatsApp: https://bit.ly/49GMbxW  ------------------------------------------------------------------------------------------------------------------------------------------------------ Download FMT News App: Google Play – http://bit.ly/2YSuV46 App Store – https://apple.co/2HNH7gZ Huawei AppGallery - https://bit.ly/2D2OpNP  #FMTNews #SST #Taxes #NationalDebt

Transcript

00:00Where do our taxes go?

00:02It's a question we ask all the time.

00:04But before we get to that, here's what you need to know.

00:10Malaysia's tax revenues are relatively low compared to the size of its economy.

00:15In fact, tax revenue has hovered at around 12% of the country's GDP,

00:19which was estimated to be 2.04 trillion ringgit last year,

00:23making it one of the lowest in ASEAN, just above Indonesia.

00:27Still, the government remains committed to supporting the public through cash assistance, subsidies,

00:33and a wide range of social welfare programs.

00:36Currently, Putrajaya's revenue is primarily driven by direct taxes,

00:40such as individual income tax and corporate tax.

00:43A significant portion also comes from resource-based income,

00:46particularly through Petronas, in the form of taxes and dividends.

00:50But the contribution from consumption taxes is significantly lower.

00:55To strike a balance, the government bumped up the sales and service tax rate for most taxable services

01:00from 6% to 8% under Budget 2024.

01:04Prime Minister Anwar Ibrahim then went a step further in reforming the tax system

01:09by introducing several new measures during Budget 2025,

01:12including an expanded SST, a 2% dividend tax on individual shareholders,

01:17and a carbon tax set to kick in by 2026.

01:20Beginning July 1, the SST has been expanded to cover certain additional services,

01:25such as private healthcare consultations and some non-essential goods,

01:29such as imported seafood.

01:30These extra taxes are aimed at boosting government revenue,

01:34which will be used to, one, help tackle the growing national debt,

01:38and two, scale-up support for the B40 and M40 income groups.

01:43But what's the deal with Malaysia's national debt?

01:46The federal government's debt rose by 66 billion ringgit last year,

01:50reaching 1.24 trillion ringgit in nine months.

01:53Economist Golem Tai said there are two primary reasons for this exponential growth,

01:58high spending during the COVID-19 crisis,

02:01and financial mismanagement dating back to the 1MDB scandal.

02:05However, since Anwar took office in late 2022,

02:08the fiscal deficit, which occurs when government spending exceeds its income,

02:12has been in steady decline due to key tax and subsidy reforms.

02:17But Putrajay has made it clear that these reforms are primarily targeted

02:20at the wealthiest Malaysians and foreigners.

02:23The Finance Ministry assures that the SST expansion

02:26applies only to non-essential goods and services,

02:29ensuring that the daily expenses of B40 and M40 households

02:33remain largely unaffected.

02:35More importantly, a significant portion of the revenue collected from these new taxes

02:40will be allocated to the ones most in need,

02:43specifically 5.4 million Malaysians in lower- and middle-income households.

02:47No one enjoys paying taxes,

02:49but the reality is that they are key to building a fairer and more resilient Malaysia.

02:55Danish for Jereza, FMT.

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