More baby steps in Anwar's latest budget amid political hurdles

It may be an opportunity missed with measures deemed gradual’, incremental’

- Shannon Teoh

Prime Minister Anwar Ibrahim's Budget 2025 would have disappointed those seeking deep reforms, with him having just days ago talked up his government's political will to "take the bull by the horns" and resist playing to the gallery.

Instead of anything revolutionary, Datuk Seri Anwar produced what analysts have described as "gradual" and "incremental", expanding on baby steps made at Budget 2024 by slightly widening the scope of consumption and wealth taxes, as well as energy subsidy cuts.

For all his repeated talk of taking the "mahakaya" (Malay for ultra-rich) to task for enjoying a disproportionate amount of subsidies while dodging the taxman, the measures in his Oct 18 speech barely moved the needle on taxes and were ill-defined or simply politically expedient on subsidies.

It may be an opportunity missed, given that his multi-coalition ruling alliance is at its most stable now since being installed in November 2022 after a bitterly fought election that produced Malaysia's first-ever hung Parliament.

"The fiscal reform efforts do not appear to be making sufficient progress to rebalance some of its burgeoning fixed expenditure items and raising the revenue-to-GDP (gross domestic product) ratio," said UOB economists Julia Goh and Loke Siew Ting in a note published hours after the Prime Minister tabled the budget.

Malaysia is slowly weaning itself off petroleum revenue, halving in 15 years its reliance on the sector since 2009, when the contribution from oil and gas to the country's coffers was 40 per cent of total revenue.

As Mr Anwar, who is also Finance Minister, noted in his budget speech, Malaysia's tax collection made up only 12.6 per cent of economic growth in 2023, lower compared with its regional neighbours Thailand, Singapore and the Philippines.