PUTRAJAYA: Feedback from the 2025 Budget table is still coming in, supporting economic growth, as households and businesses digest key measures and initiatives that will, in essence, help the government balance the fiscal deficit while ensuring that aid is delivered to those who deserve it.

While reiterating the government’s commitment to reforms under the Civil Economy framework, Treasury secretary-general Datuk Johan Mahmood Merican, the Ministry of Finance’s most senior civil servant, told StarBiz that the “change in direction” in policies was aimed at ensuring a fairer share for ordinary wage earners and the disadvantaged. .

He said there were no plans to reintroduce the Goods and Services Tax (GST), which was implemented from April 2015 to June 2018, due to its regressive nature, which would disproportionately affect lower income brackets.

“The Prime Minister would be the first to admit that the GST is more transparent and efficient, but he believes in a progressive approach to taxation and where revenues are at the moment this is not the right time,” Johan said.

He said egalitarianism was the theme in Budget 2024 and Budget 2025, outlining the government’s concern for social justice where there was a move to rationalize the diesel subsidy and adjust electricity and water tariffs, despite concerns from business and the better-off. Steps to address where aid should be distributed more effectively.

Johan noted that only the most productive users among households were affected by the electricity tariff, and 85% were able to benefit from the discount.

“We found that the top 10% consume half of the subsidy because they are the largest consumers of electricity. “We managed to save RM4 billion from the regulation,” he said.

The same approach was followed for rationalization of diesel subsidy; Johan shared that the savings from the move were better than expected at RM600 million per month.

“The aid will be given to those in need while fleet cards are issued to eligible businesses. “A similar approach will emerge when we rationalize the RON95 oil subsidy,” he said.

Similarly, as subsidies are targeted, employers are now forced to increase the minimum wage from RM1,500 to RM1,700 per month, while the government also revised the civil service salary.

Johan admitted that the minimum wage falls below what would be considered a living wage in Malaysia.

“Increasing the share of labor in income is one of the goals of the Civil Economy framework. We are also working with the Ministry of Human Resources to resolve the issue of how the minimum wage is used as a criterion when paying new graduates.

“To level the playing field in lower income brackets, foreign migrant workers now come under the Employee Provident Fund social protection umbrella,” he said.

The need to expand the tax base remains a priority as government operating expenses continue to rise as revenues fail to keep pace. Under Budget 2025, a 2% tax was proposed for dividend income exceeding RM100,000; Johan said this reflected the government’s approach to progressive taxation on the wealthy, such as capital gains tax on disposals of unlisted shares in Malaysian companies. The budget was introduced in 2024.

“Similar to the debate between GST and Sales and Services Tax (SST), the Prime Minister has been very clear that he is committed to reforms.

“We need to broaden our tax base and reduce subsidies, but he also believes it should be done in a phased manner, which is why the government has introduced the dividend tax,” he said.

As for the extension of SST, he said the government would contact businesses to determine the final list, which it hopes to finalize early next year and implement by May.

Commenting on the tax applied to avocados and salmon in the 2025 Budget table, Johan said that the purpose was to emphasize that imported luxury goods will be taxed.

“We should have said caviar and lobster instead,” he joked.

Given the limited resources available, the government believes that the wealthy should contribute their fair share, which means subsidies should be distributed according to need; Johan assured that this would also include middle-income earners.

“We can keep subsidizing, we just need to plug the leaks and that means subsidies can’t go to the rich, big business and foreigners,” he said.

Along with the wealthy, the government has also mobilized government-linked investment companies (GLICs) and government-linked companies (GLCs) to stimulate economic growth and provide additional contributions to the development expenditure for which the government borrows. Provide financing but have to monitor due to the need to reduce the fiscal deficit.

“This move is very practical. We are working with GLICs and asking them to look at how they can increase the weight of their strategic asset allocation towards domestic direct investment. “For example, Khazanah Nasional Bhd’s RM1bil national fund of funds, which focuses on start-ups,” Johan said, adding that GLICs and GLCs will support basic infrastructure development as well as fuel fast-growing industries.

GLCs were also asked to see how they could align their mandates as business entities to support the objectives set out in the Civilized Economy framework and in line with the National Energy Transition Roadmap and the New Industrial Master Plan 2030.

“Investors are increasingly asking us about renewables, and because of the cost of building infrastructure, GLCs will need to play a role in supporting where we lead the economy. Because there is so much capital involved, we don’t see this as crowding out the private sector,” he said.

“It’s a matter of getting there. The government is committed and we are finalizing everything and hope to announce this in due course, including the income classification criteria.

“More importantly, the government wants to reassure people that they will continue to receive subsidies if they meet the income eligibility criteria,” Johan said.