Malaysia May Widen Corporate Tax Base

Malaysia could widen its corporate tax base by reviewing special and double deductions that have been in place for two to three decades, said CIMB Investment Bank. The bank cited KPMG senior adviser on tax policy Dr Verrinderjeet Singh, who proposed that the removal of selected deductions could lead to the government collecting more revenue.

The current headline corporate income tax rate is 24%, but the amount of tax companies ultimately pay is also affected by deductions, exemptions, and investment incentives. Dr Verrinderjeet Singh links Malaysia's shift towards outcome-based incentives to its response to the Global Minimum Tax.

CIMB Investment Bank said Malaysia is unlikely to introduce new tax changes in Budget 2027, with stronger collection from existing taxes and a wider tax base offering the main scope for raising government revenue. The government is expected to focus on improving tax collection, particularly by bringing more businesses into the tax net and identifying income that is not fully reported.

The Malaysian Rubber Glove Manufacturers Association has called on the government to remove or reduce the export cess, introduce stronger investment incentives, and enhance tax and labour policies under Budget 2027. The association's president, Oon Kim Hung, said these initiatives would strengthen the industry's cost competitiveness and encourage continued investment and innovation.

EY Malaysia's Tax Managing Partner, Farah Rosley, said a refined sales and services tax system could help create a more neutral and efficient tax environment for businesses. She suggested targeted business-to-business reliefs and refinements to existing exemption mechanisms to reduce tax costs that build up within supply chains.

The government's revenue collection is crucial for funding infrastructure, healthcare, national security, and other public services. Direct taxes make up more than 50% of the federal government revenue, with corporate and personal income tax among the main contributors.

Balancing corporate and personal tax is a critical measure, as discussions around Budget 2027 aim to protect households from the rising cost of living, strengthen business competitiveness, and build economic resilience. The government's approach to tax collection and policy changes will be closely watched by businesses and individuals alike.