Malaysia Budget 2023: What businesses and marketers need to know

Malaysia’s 2023 Budget was laid out on 24 February and saw Prime Minister Anwar Ibrahim talking about a growing economy, lowering taxes for businesses and bringing women back into the workforce amongst other things. 

The Malaysian government allocated RM386.1 billion for Budget 2023, the highest value it has allocated as compared to previous budgets. It is 16.3% higher than the one tabled by Anwar’s predecessor, Tengku Abdul Aziz in October 2022.

PM Anwar asked the nation’s “rich elites” to help pay for the cost-of-living crisis with taxes on share profits, luxury watches and vapes. To aid the lower income bracket, the government will be gifting cash to the poorest and cutting income tax for middle earners. "Considering the income and national wealth that is concentrated among the rich elites, it is only reasonable that the country’s revenue focuses on the low and middle-income groups,” said PM Anwar, who is also the country's finance minister. “Everything that is luxurious should be taxed properly.” PM Anwar said the government would set aside RM2.5 billion in cash handouts for more than 400,000 recipients. This is in addition to money dedicated to upskill and build capacity of poor communities, including to help young people join businesses such as delivery driving and ride-hailing.

Unlike the past two years, the government will no longer be allocating any funds for the Covid-19 response which took up 5.3% of Budget in 2021 and 6.9% of the Budget in 2022. Anwar also posited that the global outlook for 2023 seems rather bleak. However, the same apparently cannot be said of Malaysia’s 2023 forecast. Below, we breakdown what businesses and marketers need to know from PM Anwar’s budget.

1. Malaysia's economy is projected to grow by 4.5% in 2023

Anwar posited that even though the global outlook for 2023 seems bleak due to the expected slowdown in GDP to 2.3%, Malaysia is on the right track and is expected to grow by 4.5%. Its fourth quarter results showed a nearly 8.7% rise in the country’s economy and seem to show a continued trend of positive performance in the remaining part of this year.

Malaysia’s debts and liabilities which stood at RM1.5 trillion, which amounts to 81% of the country’s GDP, are now expected to drop, owing to PM Anwar’s commitment to reducing government debt to 3.2% by 2025. He added that any loans taken by the government in the future will depend on its ability to bring returns back to the country.

2. Encouraging businesses with lower taxes

The government wants more businesses to set up shop in Malaysia and intends to do so with lower taxes. Micro, small and medium businesses will benefit from a 2% drop (from 17% to 15%) on the first RM150,000 in revenue. This should save them up to RM3,000 in taxes.

In a bid to attract more electrical and electronic companies, along with businesses in the aerospace industry that were drowned out during the pandemic, the government will be introducing tax incentives. This is specifically for companies that relocate to Malaysia. Moreover, a tax rate of 15% will be applied for the C-suite until 2024. These existing tax incentives will be extended till 25 December 2025 in order to inflate capacities of these industries as well as attract an influx of investments from overseas.  

However, regarding goods and service taxes, the government does not plan to re-introduce them yet.

Additionally, the government also wants to incentivise self-declaration for unpaid taxes, for which the government will re-introduce a scheme to waive penalties.

To encourage small traders, the government will also allocate RM50 million to build 3,000 new stalls or kiosks across the country.

3. Pushing for sustainable practices 

This year’s budget also focused heavily on sustainable practices.

Bank Negara of Malaysia (BNM) will be providing loans of up to RM2 billion to support sustainable technology start-ups and help SME companies implement low carbon practices. Adding to that, Khazanah will be providing RM150 million to boost environmentally-friendly project developments. This includes supporting the market's carbon and reforestation.

Supplementing the loans, is Green Technology Financing Scheme’s (GTFS) improved guaranteed value, which increased to RM3 billion. The government plans to extend the period of the Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE) until December 31, 2025, by extending the incentive period from three to five years for eligible green activities.

4. Bringing women back to the workforce

With many companies now adopting a strict diversity, equity and inclusion practice, it is evident that women are now taken more seriously in the workforce as compared to before.

To encourage women to return to work, the Social Security Organisation (SOCSO) will increase grants equalling to 80% of the insured salary of all employees. Women returning to work after giving birth will also benefit from this grant involving a total of 290 million ringgit per year.

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