KUALA LUMPUR – Malaysia wants to increase its tax revenue in 2025 by reducing subsidies to the richest, but now faces the question of who exactly is considered to be in the top 15 percent (T15) of earners, or the so-called “mahakaya” (ultra rich) who will bear the brunt of the impending cuts in gasoline and education subsidies.

Prime Minister Anwar Ibrahim, in budget presentation on October 18, failed to clearly define the T15 group, while explicitly labeling them as “mahakaya” who have benefited disproportionately from government largesse in fuel, education and health care.

Since taking office in November 2022, Datuk Seri Anwar framed the reduction in subsidies as removing a luxury for wealthy elites while maintaining a necessity for the poor. He continues to do so by presenting the latest budget, with plans to cut subsidies and social assistance by excluding higher earners from these benefits.

“The fact remains that foreign nationals and the richest 15 per cent of consumers benefit from 40 per cent of the RON95 petrol subsidy, valued at RM8 billion (S$2.4 billion). ). This RM8 billion is better directed towards improving public services such as education, healthcare and transport,” Mr Anwar told Parliament while unveiling Malaysia’s biggest budget to date, or RM421 billion.

According to Malaysia’s latest official income survey 2022, T15s are households with combined monthly incomes of at least RM13,500 – who are often left with little disposable income after paying for housing, food, transportation and raising children.

Experts and opposition politicians say this T15 income threshold risks burdening much of the middle class and that the classification should take into account other factors such as household size and locality.

In Malaysia, about 1.1 million households with about 4.3 million individuals fall into the T15 category, estimates Anthony Dass, executive director of the Malaysian Institute of Economic Research. Malaysia has around 34 million inhabitants.

Since 2014, the government has defined family income into three broad categories to facilitate policy development and aid payment. There are the top 20 percent, or T20, whose monthly household income is RM11,820 and above; the middle 40 percent, or M40 (RM5,250 to RM11,819); and the poorest 40 percent, or B40 (below RM5,250).

Analysts say Anwar’s new approach could fuel societal divisions, particularly in schools, as it removes subsidies for the so-called rich. This policy is seen as potentially detrimental to national unity because it could create class distinctions within the community, they note.

“It’s bad for social cohesion and unity. And the use of the word subsidy for healthcare and education is wrong because it is a constitutional right of citizens to benefit from these services,” said Dr Muhammed Abdul Khalid, a researcher at the Institute of Malaysian and International Studies from Universiti Kebangsaan Malaysia.

The largest urban households with higher incomes will be hardest hit by this change aimed at penalizing mahakayas, experts believe.

Among them is Mr. Hafidz Rahmat, a 45-year-old business manager who supports a family of six.

“With the removal of petrol and education subsidies, this would increase monthly fuel costs by about RM1,000 to RM2,000 per month, which could increase my expenses by more than RM20,000 per year. This feels like a punishment for a population that contributes 80 per cent of income taxes,” Mr Hafidz told The Straits Times.

The T15 income group contributed the most to government coffers, accounting for 80% of income tax revenue in 2022.

Dr Muhammed, an economist by training, said that nationally, T15s are considered middle class in the capital Kuala Lumpur, where the cost of living is high.

“The minimum monthly household income of RM13,500, or around RM6,750 each if both husband and wife work – is that super rich? Clearly not,” he told ST.

Sticking to his promise to tax high-income earners, Anwar said on October 18 that the government would reduce fuel subsidies for 95 RON, a heavily subsidized gasoline, by mid-2025. He would also gradually reduce education subsidies for the best financed. heels, including those at prestigious government-backed boarding schools.