BUDGET 2026 REINFORCES GOVT'S COMMITMENT TOWARDS STRENGTHENING TAX GOVERNANCE -- PWC MALAYSIA

KUALA LUMPUR, Oct 11 (Bernama) -- Budget 2026 reinforces the government’s commitment to strengthening tax governance and anti-leakage measures, reflecting continued efforts to enhance fiscal transparency and enforcement, said PwC Malaysia.

PwC Malaysia tax leader Steve Chia said the emphasis on governance and enforcement builds on reforms introduced in previous years, such as the Tax Identification Number (TIN), e-Invoicing pilot and consolidation of tax administration.

Chia said that the government’s approach in Budget 2026 is more assertive and provides a clear message — voluntary compliance is encouraged, but enforcement is decisive.

Regarding the carbon tax, Chia said the measure, slated for introduction next year and covering the iron, steel and energy sectors, must be designed with clear definitions, predictable rates and robust reporting to drive low-emission investments.

He also stressed the importance of aligning the policy with the National Carbon Market Policy and the forthcoming National Climate Change Bill.

Meanwhile, Deloitte Malaysia tax and legal leader Sim Kwang Gek said that Budget 2026 provided limited details on the carbon tax’s implementation mechanism, noting that the government appears to be taking time to refine the policy to avoid overburdening businesses.

She welcomed the RM50 million Carbon Border Adjustment Readiness Fund, which will help exporters comply with the European Union (EU) and the United Kingdom’s carbon border measures, calling it timely ahead of the EU’s Carbon Border Adjustment Mechanism (CBAM) rollout in January 2026.

“The carbon tax would prevent tax leakage, as payments under CBAM by Malaysian exporters would instead be collected domestically,” she said.

At the household level, Chia welcomed the expansion of the RM2,500 individual tax relief to include food waste grinders, saying such incentives promote greener behaviour.

Meanwhile, the Associated Chinese Chambers of Commerce and Industry of Malaysia’s (ACCCIM) president, Datuk Ng Yih Pyng, said the business community is relieved that Budget 2026 does not propose new taxes, given the high operating costs and weak demand that micro, small and medium enterprises (MSMEs) are facing.

He welcomed the government’s acceptance of several ACCCIM proposals, including the Market Development Grant (MDG), green energy, agriculture investment, property and Accelerated Capital Allowance (ACA).

“While we welcome the proposed increases in MDG to RM60 million, it is proposed that a special tax rate can be considered for small and medium enterprises (SMEs) that have shown significant incremental growth in their export growth.  

“Following this higher allocation of MDG, we hope that MATRADE can consider increasing the lifetime cap of the MDG to RM500,000, while raising the per-claim ceiling to RM35,000 for international trade fairs and exhibitions and RM10,000 for locally held trade fairs and exhibitions,” he said.

Ng said that Budget 2026, however, did not provide a higher taxable income for SMEs enjoying a preferential income tax rate of 15 per cent, which is currently set on the first RM150,000 of taxable income. 

“A higher threshold of taxable income for a lower tax rate not only would ease the financial burdens of SMEs but also provide more savings for undertaking business spending,” he said. 

-- BERNAMA