Malaysia proposes corporatising the Customs Department to boost tax collection

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Corporatise Malaysia's Customs Department

Highlights

The Malaysian government has been urged to corporatise the Customs Department to grant it greater operational autonomy, following the Inland Revenue Board model adopted since 1996.
Corporatising the Customs Department is expected to improve the efficiency of sales tax, service tax and excise duty collection while reducing leakages, with border security functions remaining under the government.
Tax revenue in 2026 is projected to reach RM280.8 billion, up 8.1% from RM259.8 billion in 2025, driven by e-invoicing enforcement and improved tax compliance.

This article was translated from the original. Read the original version by our correspondent here.

Proposal for operational autonomy in tax collection

As reported by The Edge Malaysia, KPMG Malaysia tax policy adviser Dr Veerinderjeet Singh said the government should consider corporatising the Customs Department so that the agency has greater autonomy to improve tax collection efficiency.

He said the Customs Department could follow the example of the Inland Revenue Board, which corporatised its operations in 1996 and subsequently improved the quality, speed and effectiveness of tax collection. According to him, the corporate model enables the use of modern techniques, better recruitment and the flexibility to source expertise from the private sector.

Veerinderjeet stressed that under the model, the Customs Department would remain under the jurisdiction of the Ministry of Finance and would still be bound by national fiscal policy and tax rate structures. He said corporatisation provides greater operational autonomy, particularly in financial and staff management, while continuing to act as a government agent.

He added that corporatisation, at least for the sales tax, service tax and excise duty units, could help reduce leakages, strengthen internal controls and increase revenue collection. At the same time, border security functions could remain under direct government supervision.

2026 revenue projections and compliance impact

Veerinderjeet also attributed part of the increase in government tax revenue to better compliance and the mandatory implementation of e-invoicing, in addition to the expansion of the Sales and Service Tax, or SST.

According to the Ministry of Finance's Fiscal Outlook and Federal Government Revenue Estimates report for this year, tax revenue in 2026 is projected to reach RM280.8 billion, up 8.1% from RM259.8 billion in 2025. The report stated that direct taxes grew 5.8% to RM191 billion, driven by improved income tax collection.

The increase in corporate income tax collection to RM101.7 billion was linked to the phased implementation of e-invoicing, which reduces leakages and strengthens compliance. In this context, the proposal to corporatise the Customs Department is seen as aligned with the government's broader efforts to modernise revenue administration and strengthen the country's tax collection discipline.

In our earlier coverage of the extension of income tax exemptions for local shipping companies, we reported that the government extended the incentive for 10 years, from 2027 to 2036, to encourage ship registration and investment in maritime assets in Malaysia. The article also outlined the introduction of a fixed stamp duty rate for financing the purchase or construction of ships, aimed at reducing transaction costs and providing long-term planning certainty for industry players.

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