KUALA LUMPUR: The federal government’s revenue is projected to rise 2.7% to RM343.1 billion in 2026 from RM334.1 billion expected in 2025, mainly driven by tax collections, the Finance Ministry (MoF) said.
Tax revenue, forecast at RM270.4 billion in 2026, will account for 78.8% of total revenue, equivalent to 12.7% of gross domestic product (GDP), the MoF said in its Fiscal Outlook and Federal Government Revenue Estimates 2026 report released today.
For 2025, the government’s revised revenue is estimated at RM334.1 billion, up 2.9% from 2024, with tax revenue remaining the major contributor.
Non-tax revenue is projected at RM72.7 billion, or 3.4% of GDP, in 2026, compared with an estimated RM80.7 billion, or 24.2% of total revenue, in 2025, the ministry said.
Direct Tax
The MoF said direct tax collection is projected to increase by 5.8% to RM187.4 billion in 2026, constituting 69.3% of total tax revenue, largely contributed by higher collections from individual and corporate income taxes.
Collection from companies’ income tax (CITA) will remain the largest source of direct tax, estimated at RM103.4 billion, supported by sustained domestic economic activity and the full-year implementation of the e-invoicing system, it said.
“Likewise, individual income tax is estimated to increase by 9.4% to RM49.1 billion in 2026, reflecting a stable labour market and continued wage growth,” the MoF said, adding that the second phase of civil service salary adjustments is expected to further broaden the taxable base.
In addition, revenue from other direct tax components, particularly stamp duties and real property gains tax, is projected to expand to RM10.3 billion and RM2.4 billion, respectively, in 2026, in line with higher transactional activity within the real estate sector.
On petroleum-related revenue, the MoF said it is expected to contract further to RM43 billion next year, mainly due to lower dividends from Petroliam Nasional Bhd (Petronas).
Indirect Tax
The MoF said indirect tax is projected to grow 8.9% to RM83 billion in 2026, with collection from sales and service tax (SST) expected to remain the major component, contributing RM59.6 billion, or 71.8% of total indirect tax collection.
Sales tax is forecast at RM26.6 billion, while service tax is projected to reach RM33 billion, reflecting buoyant consumption in conjunction with Visit Malaysia 2026.
“Moreover, excise duties are anticipated to record RM12.8 billion, underpinned by moderate motor vehicle production, the introduction of new vehicle models, intensified promotional activities, and the removal of excise duty exemptions on completely built-up electric vehicles beginning in 2026,” it said.
For 2025, the MoF said indirect tax collection is forecast to grow further by 11.3% to RM76.3 billion, driven by higher SST receipts.
“The growth is mainly bolstered by service tax, which is anticipated to surge by 26.1% to RM29.3 billion, following the full-year implementation of the service tax rate at eight per cent, coupled with the wider scope of taxable services, such as logistics, rental, and selected financial services,” it said.
Similarly, sales tax collection is estimated to grow by 12% to RM24.1 billion, supported by robust private consumption and the expansion of sales tax on selected goods. - Bernama
