As Malaysia prepares for the tabling of Budget 2027 by Prime Minister and Finance Minister YAB Dato’ Seri Anwar Ibrahim on 9 October 2026, the Malaysia Retail Chain Association (MRCA) has outlined a strategic fiscal wishlist aimed at fostering a sustainable, competitive and resilient retail sector.
Malaysian businesses are navigating an increasingly complex operating environment, with rising operational costs and growing competition from overseas players. Against this backdrop, MRCA said policy consistency, regulatory clarity and equitable economic frameworks are essential to improving productivity and supporting job creation.
The association has called on the Ministry of Finance to consider several macroeconomic measures when formulating Budget 2027, with its proposals centred on creating a fairer operating environment for local retailers while supporting long-term economic growth.
Level the Playing Field for Cross-Border E-Commerce
One of MRCA’s key concerns is the compliance disparity between local brick-and-mortar retailers and foreign e-commerce platforms offering ultra-low-priced goods to Malaysian consumers.
The association said local retailers continue to face significant compliance obligations while some cross-border platforms remain untaxed or under-taxed. According to MRCA, this structural imbalance places pressure on domestic businesses and could contribute to erosion of the national tax base.
To address the issue, MRCA is calling for stricter policies and more equitable surcharges on cross-border e-commerce transactions, including stronger enforcement of the Sales Tax on Low-Value Goods (LVG).
The association is also urging the Government to strengthen regulatory controls against counterfeit and inferior goods sold through e-commerce platforms.
Such measures, MRCA said, would help protect consumer safety and quality standards while safeguarding the intellectual property and interests of legitimate brand owners.
Reduce Tax Burdens and Encourage ESG Investment
MRCA has also highlighted the rising tax burden on commercial operations, particularly where businesses are required to pay taxes on costs that are effectively operational reimbursements.
One immediate concern is the 6% Service Tax on utility supplies for commercial tenants paying through mall management, which took effect on 1 July 2026.
The association is calling for an exemption from the Service Tax on these utility pass-through payments, arguing that taxing such reimbursements creates an inequitable double-taxation effect and contributes to higher operating costs for businesses.
MRCA is also proposing targeted tax rebates or double tax deductions for commercial stakeholders investing in ESG-related operational upgrades.
In particular, the association wants incentives for investments in facility governance, public safety, active fire safety systems and modernised infrastructure. Such incentives could encourage businesses to make capital investments that improve both operational resilience and public safety.
The association is further maintaining its proposal to reduce the Service Tax on construction and renovation services to 3%, noting that building materials are already subject to taxation.
MRCA Calls for a Phased Return of GST
Another major proposal in MRCA’s Budget 2027 wishlist is the phased reintroduction of the Goods and Services Tax (GST).
Rather than an immediate return to a higher rate, the association is advocating a staggered, step-up structure beginning from a lower base and progressively adjusting upwards over five-year intervals.
MRCA said a phased approach would give businesses sufficient time to adapt while cushioning household sentiment and supporting economic stability.
The association also called for a transparent, multi-stage consumption tax system supported by a reliable refund mechanism and strict zero-rating for essential goods.
According to MRCA, such a system could help reduce the compounding costs associated with the existing Sales and Service Tax (SST), broaden the national revenue base and establish a fairer tax ecosystem for both businesses and consumers.
Strengthen Domestic Retail Through Targeted Tax Relief
MRCA is also seeking measures to strengthen the competitiveness of Malaysia’s domestic retail economy.
The association has proposed eliminating sales taxes on locally manufactured goods, arguing that removing these cascading costs would enable domestic retailers to offer more competitive prices against imported products.
The measure could also support local manufacturers while encouraging domestic production and consumption.
By reducing the tax burden across the local supply chain, MRCA believes the Government can strengthen the position of Malaysian businesses and stimulate activity within the domestic economy.
Expand Domestic Tourism Tax Relief
Tourism is another area highlighted in MRCA’s Budget 2027 wishlist.
The association is calling for the RM1,000 domestic tourism tax relief to be extended through 2027 and for its scope to be expanded beyond specific sectors.
MRCA is proposing that the relief explicitly cover hotel accommodation as well as targeted retail shopping expenditures.
The association believes broadening the relief could maximise the economic multiplier effect of domestic tourism by encouraging Malaysians to spend on accommodation, travel and retail activities within the country.
Building a More Resilient Malaysian Retail Sector
MRCA said a stable and business-friendly policy framework would help reduce compliance costs, strengthen investor confidence and create a more sustainable operating environment for retailers.
As Malaysia prepares for Budget 2027, the association remains committed to working with the Government and providing industry insights to help shape policies that support businesses and consumers.
For MRCA, the overarching objective is to establish a fairer and more predictable economic framework that enables Malaysian retailers to remain competitive while contributing to a globally competitive and sustainable retail sector.
