Finance Ministry says e-invoices, though unpopular, are necessary to rein in shadow economy 

PUTRAJAYA, Aug 18 — The Ministry of Finance today admitted that some of its policies are unpopular but defended them as necessary, as it addressed stakeholders ahead of Budget 2027 tabling in October.

Minister of Finance II Datuk Seri Amir Hamzah Azizan pointed to e-invoicing among others, a policy that he said is crucial to shrink the size of the country’s massive shadow economy but was met some grumbling from mostly small enterprises.

“The effort to restructure the economy is not an easy task. Most of the time the policies that are put in place are unpopular but are necessary for long term benefits and prosperity,” he said in a speech.

“The implementation of e-invoice in phases is the backbone to the transparency of the business ecosystem. The point of this is not to burden anyone, but functions as a way to shrink the shadow economy,” the senator added.

The size of Malaysia’s shadow economy, also referred to as the underground or informal economy, is estimated to be roughly 21 per cent to over 30 per cent of gross domestic product, depending on the estimation methodology and reporting period.

In absolute financial terms, official and academic estimates place its value between RM300 billion and roughly RM330 billion annually.

The mandatory e-invoicing policy was met with some resistance, as businesses said they are frustrated by how complicated, expensive, and stressful the system is.

Many companies said they struggle to make existing software work with the government’s strict formatting rules, which causes major delays in daily sales and supply chains.

Smaller businesses, in particular, feel overwhelmed by the high costs of upgrading their tech and the constant pressure to get every single detail right.

Furthermore, companies are worried about the harsh punishments for minor mistakes, including heavy fines and potential jail time for failing to comply.

They also feel that the rules and guidelines keep changing too quickly without clear enough explanations, leaving business owners feeling anxious and unsupported as they try to follow the law.