Malaysia's Economy Minister Akmal Nasrullah Mohd Nasir announced the government will prioritise raising wages and expanding the tax base before considering reintroducing a goods and services tax (GST), following recommendations from the OECD [1, 2]. He said only about 15% of Malaysia's workforce currently pays income tax, highlighting the narrow base for revenue collection [1, 2].
The OECD had recommended that Malaysia strengthen its fiscal position by reintroducing a broad-based consumption tax and broadening the personal income tax base [1, 2]. However, Akmal stressed that improving wages must come first. "While we respect the view from OECD, at the same time, I think what's more important is how to broaden our tax income. Without the higher pay or better wages, then whatever tax that we introduce may have some repercussions in terms of what people consume or what people earn," he said [1].
Despite Malaysia's GDP growth rate of 5.8% in the second quarter of 2026, the Economy Ministry acknowledged a gap between this figure and people's real experience. Akmal said, "GDP is just a question of numbers and will continue to be a challenge to us (the ministry) to ensure it actually benefits the people" [3].
Data from May 2026 revealed the manufacturing sector achieved productivity growth per worker of 7.7%, but salary growth lagged at only 1.8% [3, 4]. Bank Negara Malaysia (BNM) deputy governor Datuk Marzunisham Omar pointed to this imbalance, calling for a review of Malaysia’s wage-setting system during the BNM Sasana Symposium 2026. He noted that minimum wage increases had caused wage compression, where starting salaries of qualified professionals remain close to the minimum wage [5].
Marzunisham said, "What really matters is for our rakyat to have good quality life, good jobs with reasonable and high level of income. And that is what I think our policy should strive for" [5]. He also highlighted that about 35-36% of Malaysian workers are underemployed, working in jobs requiring less qualifications than they have [5]. BNM and Malaysian Investment Development Authority officials agreed wages should rise in line with productivity and national wealth growth [5].
The government plans to maintain its development spending target of RM58 billion for 2027, with at least 70% allocated to basic development projects despite ongoing global supply challenges [6].
Malaysia’s next major fiscal update will come in 2027 when the government reviews development expenditure and tax policies amid efforts to stimulate wage growth.
