Economists welcome proposal to raise tax relief threshold

Goh Lim Thye and Ida Yasin say raising the individual income tax relief threshold to RM12,000 would boost disposable income for lower- and middle-income groups.

Current household spending has shifted towards digital tools and expenses related to health and wellbeing, according to economist Goh Lim Thye. (Envato Elements pic)

PETALING JAYA:

 Two economists have welcomed former finance minister Lim Guan Eng’s proposal that the individual income tax relief threshold be raised from RM9,000 to RM12,000, with one calling for a comprehensive review of tax-deductible items.

Goh Lim Thye.

Universiti Malaya senior lecturer Goh Lim Thye said Lim’s proposal was reasonable given that the personal tax relief threshold has not been revised in 15 years despite significant increases in living costs.

However, he stressed that a more meaningful approach would be to review the relief categories and thresholds as a whole rather than adjusting a single figure in isolation.

“The issue is not solely the headline relief threshold, but whether the overall relief framework remains aligned with current consumption patterns and cost pressures,” Goh told FMT.

He urged the government to ensure that targeted deductibles reflect current household spending, which has shifted towards digital tools and expenses related to health and wellbeing.

Goh added that periodic reviews, better targeting of vulnerable groups, and closer coordination with cash-aid programmes would help households cope with rising living costs.

Nevertheless, he said an upward revision would provide higher disposable income to lower- and middle-income earners, potentially easing financial pressures at home.

Ida Yasin.

Similarly, Ida Yasin of the Putra Business School said the proposed measure would increase beneficiaries’ disposable income, helping them manage the rising cost of living.

She added that lower- and middle-income groups would likely spend the extra money locally, thus supporting the domestic economy.

Goh cautioned, however, that this outcome was not guaranteed unless the policy explicitly encouraged that the additional income be directed toward local goods and services.

On Jan 2, Lim said he would propose to Prime Minister Anwar Ibrahim that the individual income tax relief threshold be increased from RM9,000 to RM12,000, noting that the current rate no longer reflects today’s cost of living.

He also suggested implementing the increase in stages — RM1,000 per year until 2028 — to avoid over-straining government finances. - FMT