Accra:According to BERNAMA News Agency, CIMB Securities Sdn Bhd anticipates that the personal income tax relief measures in Budget 2027 could result in annual tax savings of up to RM1,600 for around five million taxpayers. These measures, aimed at supporting middle-income consumption, include increasing the basic individual tax relief from RM9,000 to RM12,000 and a one percentage point reduction in tax rates for chargeable incomes ranging from RM70,001 to RM150,000.
The budget also proposes benefits for businesses through lower corporate tax rates for micro, small, and medium enterprises, alongside expanded sales tax recovery for machinery and production inputs. Manufacturers will be permitted to reclaim sales tax on machinery, spare parts, and equipment from local distributors, as well as on raw materials for pharmaceuticals, animal feed, fertilizers, and pesticides.
CIMB Securities notes that the budget supports household incomes and investments while maintaining fiscal discipline, despite potential risks from higher wages for labor-intensive businesses. The government's fiscal deficit target for 2027 is set at 3.3% of GDP, slightly better than the previous forecast of 3.4%, despite a revised 2026 deficit of 3.6%.
The budget is viewed as positive for the consumer sector in the long term, aided by targeted cash assistance and tax reliefs designed to ease living costs and boost disposable income. Incremental spending is expected to focus on essentials and affordable food and beverages, benefiting retailers like 99 Speed Mart, Eco-Shop, AEON, and MR D.I.Y., with spillover benefits to consumer staples producers such as Nestlé Malaysia, QL Resources, and Life Water.
A significant change is the 17.6% increase in the minimum monthly wage to RM2,000 from June 2027, expected to benefit over four million workers. However, MSMEs with annual sales below RM50 million are exempted. This wage increase could raise labor costs for retailers and food and beverage operators, particularly those with labor-intensive operations, as companies may need to adjust other salary bands to maintain pay differentials.
Additionally, increased minimum wages would likely raise costs for labor-intensive sectors such as plantations, glove manufacturing, and services, though the implementation starting in June 2027 limits immediate earnings impacts. Companies focusing on efficiency and automation may better offset rising labor costs.
On the investment front, CIMB Securities highlights the RM83 billion development expenditure allocation, continued infrastructure investments, housing incentives, and Johor connectivity improvements as advantageous for construction and property companies. Renewable energy and technology sectors are also set to benefit from extended green investment incentives and semiconductor funding.
Overall, CIMB Securities views Budget 2027 as neutral to mildly positive for Malaysian equities, expecting limited direct impact on aggregate FTSE Bursa Malaysia KLCI earnings in 2027.