Malaysia plans subsidy cuts for 'ultra rich', but who exactly are they?

Using top 15% income threshold impacts huge swathe of the middle class: Experts

- Zunaira Saieed

Malaysia wants to raise its tax revenue in 2025 by cutting subsidies for the wealthiest, but is now faced with the question of who exactly qualifies as its top 15 per cent (T15) of earners, or the so-called "mahakaya" (ultra rich) who will bear the biggest burden from the impending cuts on petrol and education subsidies.

Prime Minister Anwar Ibrahim, in presenting the budget on Oct 18, did not define the T15 group clearly, while explicitly calling them "mahakaya".

Since taking office in November 2022, Datuk Seri Anwar has framed subsidy cuts as removing a luxury from wealthy elites while maintaining a necessity for the poor. He continues to do so in rolling out the latest budget, with plans to cut back on subsidies and social assistance by excluding top earners from these benefits.

"The fact remains that foreign nationals and the wealthiest 15 per cent of consumers are enjoying 40 per cent of the RON95 petrol subsidy, valued at RM8 billion (S$2.4 billion). This RM8 billion is better directed towards improving public services such as education, healthcare and transportation," Mr Anwar said in Parliament while unveiling Malaysia's largest budget to date of RM421 billion.

Based on Malaysia's latest official income survey in 2022, the T15 are households with combined monthly incomes of at least RM13,500 - who are often left with little disposable income after paying for housing, food, transport and raising children.

Experts and opposition politicians argue that this T15 income threshold risks burdening a huge swathe of the middle class, and that the classification should take into account other factors such as household size and locality.