KUALA LUMPUR, July 28 — Economy Minister Akmal Nasrullah Mohd Nasir today said Malaysia must first address its long-standing structural wage problem before considering any significant expansion of the country’s personal income tax base.

Responding to the latest OECD Economic Survey of Malaysia, which recommended broadening the personal income tax base to increase government revenue, Akmal Nasrullah said the priority remains raising wages rather than taxing more Malaysians.

“The issue is how Malaysia continues to focus on efforts to increase the income of more people,” he told reporters after the survey’s launch today. 

He noted that only around 15 per cent of workers currently pay income tax, reflecting the country’s relatively low wage levels.

“What’s more important is how to broaden the tax income because definitely without higher pay or better wages, whatever tax that we introduce may have repercussions on what people consume and earn,” he said. 

Akmal Nasrullah said Malaysia’s tax challenges stem from a structural issue rather than simply a lack of tax instruments.

“We have to be more courageous in facing the tax issue, which is still a structural problem. The structural problem is due to the fact that wages are not enough to pay income tax,” he said. 

He added that Putrajaya’s current approach is to continue tackling the wage gap while implementing tax measures that expand government revenue without constraining economic growth.

“From the perspective of the measures introduced by the Ministry of Economy, it is also necessary to consider how to broaden the space, but not to limit the growth of the economy,” he said. 

Earlier, the OECD recommended that Malaysia continue strengthening its public finances through both spending reforms and additional revenue measures, including broadening the personal income tax base.

However, OECD representatives stressed that the organisation respects Malaysia’s decision not to introduce a value-added tax for now, saying the survey merely outlined policy options that could help the country meet its fiscal consolidation targets.