What drives the projected 9.4% rise in individual tax revenue by 2026?

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Projected 9.4% Increase in Individual Tax Revenue by 2026 Driven by Stable Wage Growth and Increased Taxpayer Base

Individual tax revenue is forecast to rise by 9.4 per cent in 2026, reaching an estimated RM49.07 billion. This growth is primarily attributed to more stable wage increases and an anticipated 13 per cent expansion in the number of registered individual taxpayers. Factors such as decreasing unemployment rates and adjustments to civil servant salaries under the Public Service Remuneration System (SSPA) are also contributing to this projected increase.
Stable Wage Growth and Employment Factors

The Finance Ministry anticipates that more consistent wage growth will be a significant contributor to the rise in individual tax revenue. This is supported by a decrease in the unemployment rate, which implies a larger segment of the population is employed and earning taxable income. The civil service salary adjustments, specifically under the SSPA, will also bolster the income levels of a considerable number of taxpayers, thereby increasing the overall tax base.
Expansion of the Taxpayer Base

A key driver for the projected revenue increase is the expected 13 per cent rise in the number of registered individual taxpayers by 2026. This expansion suggests that more individuals will be brought into the tax net, either through increased economic activity leading to new employment or through improved tax administration and compliance measures. The combination of more people earning income and a larger pool of taxpayers directly translates to higher aggregate tax collection.
Economic Conditions Supporting Revenue Growth

Beyond wage and employment factors, broader economic conditions are expected to underpin the revenue projections. While not directly impacting individual income tax, higher corporate earnings, particularly within the services and manufacturing sectors, contribute to overall economic health. Furthermore, the phased implementation of e-Invoicing, starting in August 2024, is designed to enhance tax compliance and reduce revenue leakages, which indirectly supports a more robust and predictable tax collection environment for both individual and corporate taxpayers.

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What drives the projected 9.4% rise in individual tax revenue by 2026?

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