Kuala Lumpur, 17 September 2025 — The Federation of Malaysian Manufacturers (FMM) has called on the government to refrain from introducing new taxes in the upcoming 2026 Budget, warning that the manufacturing sector is already under pressure from rising costs and global uncertainty. With the private sector contributing more than half of government revenue, FMM President Tan Sri Soh Thian Lai urged authorities to avoid further fiscal burdens that could dampen business momentum.
At a recent press event unveiling the FMM Business Conditions Survey for the first half of 2025, Soh remarked that manufacturers need breathing space — time and flexibility to stabilise operations, invest and plan, rather than be challenged by new tax or regulatory costs. He emphasised that excessively high tax measures risk being counterproductive: when firms’ profits are squeezed too thin, their capacity to contribute to government coffers diminishes.
The survey revealed that the expansion of the Sales and Services Tax (SST) under Budget 2025 has already had a notable impact on manufacturers. Only about 6 percent of companies reported no effect; 39 percent said the changes led to manageable cost increases and compliance adjustments. However, 44 percent described substantial effects, with heavier compliance burdens and operational challenges. Around 11 percent said the changes were highly disruptive, forcing shifts in their business models or even reducing operations.
One of FMM’s key proposals is the reintroduction of the Goods and Services Tax (GST). Manufacturers argue that GST offers greater transparency, reduces cascading tax effects, and allows for input tax credits — features that could help alleviate cost pressures and streamline tax compliance across supply chains.
Other priorities raised include broader exemptions under the expanded SST for critical industrial inputs, clearer guidelines for product classifications, and better compliance support for mixed-supply situations (where companies deal in both taxable and exempt goods/services). Financial or advisory support to assist firms in adapting to regulatory changes was also urged.
FMM’s stance is informed by the broader economic challenges facing manufacturers: rising input costs (including energy, raw materials and labour), disruptions in supply chains, currency volatility, and weaker demand in some export markets. Within this context, the group argues that adding new taxes or making tax regimes more complex could exacerbate uncertainty, reduce investment, and hinder growth.
As Malaysia heads toward tabling Budget 2026, which is expected to continue under the Madani Economy framework and be shaped by the goals of the 13th Malaysia Plan (13MP), FMM’s appeal reflects both urgency and caution. The manufacturing sector sees itself as a backbone of revenue and export performance — but warns that without tax stability, the sector’s ability to fuel economic growth may be compromised.
In short, FMM is asking the government to prioritise consistency and predictability in fiscal policy. Rather than imposing new taxes, it suggests refining existing tax mechanisms, protecting critical inputs and offering better guidance so businesses can adapt. It remains to be seen how the government balances revenue needs against the pleas for stability — but the message from the manufacturers is clear: fiscal policy should support growth, not stress the foundations.
