Budget 2025 Set To Expand Tax Base With Expected Sugar Tax, HVGT, GloBE -- Economist

KUALA LUMPUR, Oct 14 (Bernama) -- The government is expected to unveil new tax measures in the upcoming Budget 2025, set to be tabled this Friday, as the tax base has shown limited growth since the Goods and Services Tax (GST) was abolished in 2018.

Budget 2025 will mark the final budget for the 12th Malaysia Plan (2021-2025).

KSI Strategic Institute for Asia Pacific economic advisor Anthony Dass said the government is likely to explore measures to broaden the tax base.

“For 2025, we believe the government may introduce or implement a sugar tax, a high-value goods tax (HVGT), and the global anti-base erosion (GloBE) tax,” he said in a note today.

Dass explained that an expansion of the Sugar Tax is anticipated, following the Health Minister’s proposal to raise the tax on sugar-sweetened beverages to 20 per cent of the retail price as part of a “war on sugar” campaign.

He added that the HVGT is expected to reappear after a delay in its implementation, while for the GloBE rules, affected companies will face a 15 per cent tax starting on 1 January 2025. This move aligns with international tax standards, particularly to curb base erosion and the shifting of profits to low-tax jurisdictions.

Dass reiterated that GST is unlikely to feature in Budget 2025 despite increased speculation among market participants regarding its potential reintroduction.

“Statements from some government officials suggest that the economy is not yet ready for that move. "We suspect the government may instead expand the scope of the Sales and Services Tax (SST) to increase revenue. The SST covers 41 per cent of goods and services, while GST previously covered 76 per cent,” he added.

In line with the Public Finance and Fiscal Responsibility Act 2023, the government is expected to continue rationalising operating expenditure (OPEX). 

Budget 2025 is poised to incorporate OPEX consolidation, particularly in subsidy expenditure.

“However, the quantum of consolidation will remain modest,” he said.

He added that the budget is expected to focus on the increasing significance of the digital economy by expanding broadband access, promoting digital innovation, and developing smart cities.

Additionally, there will likely be an emphasis on investments in infrastructure upgrades, flood mitigation, renewable energy and the modernisation of energy grids.

-- BERNAMA