Yes, T20s Should Lose Their Subsidies (Just Not All Of Them)

Added: 2026-05-25

[00:00:00]Husband of 6,000 ringgit, wife on 6,000 ringit. They are T20. A single guy earning 10,000 ringgit per month. He's M40. Yes, this is real. And this is how the government classifies who's rich enough and potentially could lose their petrol subsidies in the near future. I get it. It's math, right? There will always be someone who is T20. It is a top 20% of people. But is this the right way to approach it? So, in case you guys didn't know, there's a lot of talk right now about the government using this figure, this T20, M40, B40 classification to sort of decide who can get petrol subsidies and who can't because understandably at least petrol prices are rising and they can't foot the bill forever. So, in a way, I do agree with this move. I think it has to happen eventually, but there are some things I'm looking for as well. So, in today's video, I'll be talking about should T20s lose their petrol subsidy, where should the line actually be and importantly, where can the government potentially get more revenue from? I'm not really, you know, an economics expert, but I do read up on these things a lot. And well, I guess I did learn economics in university, but anyway, let's get to it. So, let's start with why this is even a conversation. Before the Iran war, before all of these things happened, the government was footing a subsidy bill of around 700 million ringit a month. It is a lot actually, but it's something that we've been doing over multiple years. And they did budget for this. They know that they can afford this. But because of the war, oil prices have been going up and right now the subsidy bill that the government is paying is getting close to 7 billion ringit a month. That is a 10x increase over what they budgeted for. Imagine setting aside a budget to buy your house or to renovate your house, let's say, of 100,000 ringgit and at the end of the day, you suddenly have to pay 1 million ringit. There's just no way you can afford that, right? And when we look at the 2026 budget that they tabled last year, they allocated 15 billion ringit for patrol subsidies for the entirety of 2026. Whereas now projections are looking at closer to 58 billion ringit.

[00:02:03]So again, close to 4x what they initially budgeted for the entire year.

[00:02:07]This figure, by the way, is roughly 12% of the entire federal operating budget.

[00:02:12]That is a lot of money just to channel towards fuel subsidies. And we all know that yes, the subsidy is expensive, but so what? Why can't we just keep paying for it, right? Well, the answer is kind of obvious, I guess. We don't have an unlimited amount of money and petrol is not free. We are importing our petrol from other countries and we have to pay that. And one thing that we have to realize is that Malaysia only collects 20% of our entire GDP as revenue. If we compare this to other countries, our Southeast Asian peers, Thailand and Philippines, they both collect 21%.

[00:02:42]Japan and the UK 38%, Germany and France close to 50% of their GDP they collect in revenues. So here's the actual thing.

[00:02:51]Yes, subsidies are high. Yes, it is a problem. But the bigger issue for Malaysia is that subsidy cost as a percentage of the entire government revenue is just way too big. It's like taking a big slice of a small pie. And we look at the fiscal deficit for 2025.

[00:03:06]Fiscal deficit is essentially how much the government spent minus how much the government made. And deficit means that the government actually spent more than they made. But in 2025 it was 3.7%. It peaked in 2020 at 6.4%. And the government wants to bring this down to under 3% by 2030. The way that we're going right now, there's just no way it's going to work. So now let's talk about is it fair you know to take away some subsidies to reduce the government's cost by removing petrol subsidies from the T20. So I'm going to make you know the argument against this because I know that you know I acknowledge the arguments that a lot of people are making you know about how this is not fair. There's a few things that they're mentioning. So the first argument is that the T20s they already pay the bulk of income taxes in Malaysia and that is 100% true. roughly 85% of the personal income taxes that the government collects comes from the T20s alone. So it is a big share. So they're saying, you know, because we already contribute so much to the government, how is it fair that, you know, now our subsidies are being taken away. We're giving more and now we're getting less as well. And then the second argument is that, you know, T20 is a very general rule. A T20 in Koala Lumpo is not the same as a T20 in Perles. I don't live in Perles, but I would imagine if you're T20 there, you would be living pretty okay, you know, because cost of living there is lower. Whereas in KL, you'll be earning 12,000 ringgit. Yes, it is a good amount of money, but once you include, you know, the higher cost of living, once you include the fact that people might have kids, then 12,000 ringit might not go very far. And the third and final argument that I've been seeing going around is that T20 people, they are just people as well. They've been planning or budgeting their entire finances around petrol prices that are around 2 ringgit per liter. So, you know, they made this whole budget. They decided this is going to transportation, this is going to my house, this is going to my kids, etc., etc., etc. So, now it feels a bit unfair that all of a sudden there's going to be a major increase in the transportation cost and they might not be able to afford it anymore.

[00:05:01]Honestly, some of these are really good arguments and I agree with a lot of it, but I have to say that I take a different view. My view is that subsidies needs to be cut eventually.

[00:05:14]Even before this entire higher oil prices Iran war thing happened, I did think that Malaysia eventually has to reduce our petrol subsidies. But now, maybe I'm saying we don't cut it from T20s. Maybe we move to line. Maybe we look at T10s instead. But the first thing I want to say to the people who say, you know, T20s already pay the most income taxes, so why are our subsidies being removed? Well, my answer to that is that that is just how taxes work, right? The fact that you're paying taxes means that you are earning a higher income. And just because you pay more taxes doesn't mean that you should be getting back more because then that defeats the entire purpose of taxes, right? You're meant to pay more to the government so that they can rechan this to help others who are more in need like the M40s and B40s. Yes, I know times are tough. I know that the cost of living is rising. You know, every time I see this video about how, you know, T20s are suffering right now, I agree it's not so easy out there, but it's still a lot easier than earning 2 3,000 ringgit a month. Having said that, I do think that T20 is just too wide of a bracket. If you look at the bottom T20s, they're earning around 11,800 ringgit a month.

[00:06:22]Whereas, if you look at the 50 richest people in Malaysia, they have a combined wealth of 458 billion ringit. And the problem with a T20 classification is that these two groups of people are the same. They are both T20s and they're being treated the same when it comes to petrol subsidies.

[00:06:38]So, like I said, my opinion of this is that we should start with a higher line, maybe T10s, right? I pulled the data from our Department of Statistics and it shows that the top 10% of Malaysians earn around 6,200 ringgit per month.

[00:06:51]That to me is a cleaner cut. These guys should definitely be doing better off.

[00:06:55]But I know that you know even if they did that then the T10s will say how is it fair that we have to have our petrol subsidies removed why not the T5 but in my opinion the line has to be drawn somewhere and at a certain point right you have to manage your expenses if you're earning 16 20 30,000 ringit a month and you feel like you can't make ends meet then in my opinion at least that is a spending problem not an income problem either way my stance on this is that the principle is right the thinking is right like we have to remove petrol subsidies somewhere and we have to do it quick but the executions might be a bit wrong if they want to do it on all T20s across the board. Now let's talk about the government revenue side. What can we do to increase our revenue so that we can sustain these petrol subsidies better? So an argument that I'm seeing a lot of people make is that yeah T20s shouldn't be taxed. We should be targeting the billionaires, the hundreds of millionaires, right? These are the guys who should be paying more. Now, I know that this is a bit of an unpopular opinion and some people might think, you know, why are you defending the ultra rich for no reason at all? But I do really think that we can't just go ahead and blindly tax all these ultra rich people because there will be repercussions. But first, let's talk about what the government is currently not taxing. So, this one, the first one is not really that they're not taxing it, but the personal income tax in Malaysia, the highest is 30%. And that is only for income above 2 million ringit. So think about the CEOs of MNC's of the largest Malaysian companies. Only these guys are in this tax bracket.

[00:08:21]Still, this is lower than countries like Japan, which is paying 55%, Korea, 45%.

[00:08:26]In the UK, they're paying 45%. So a lot of countries have a way higher tax ceiling compared to Malaysia. And it is something that we could potentially look into. Another tax that we don't have right now is inheritance tax, and we haven't had this since 1991. Um, Thailand for example, they reintroduced it in n in 2016, I think, after a 72-year gap. And another thing which is going to be a bit painful for me to say, but we also don't have any capital gains tax. Um, so for example, if you make a lot of money investing, if you make in the millions, you don't actually have to pay anything at all as a Malaysian. A great thing, but that is an area that government could potentially look at if they wanted to increase their revenue base. And then finally, a wealth tax.

[00:09:09]So, this one I'm a bit iffy on. I don't know if it's the right move to make, but one of our members of parliament, Charles Santiago, he did propose a 2% wealth tax across the board for people above a certain level of net worth. That is again something that can be considered, but this to me is a bit tricky to handle. And to show you guys to sort of illustrate, you know, the level of inequality between the richest people in Malaysia compared to everyone else. The top 50 richest people in Malaysia, like I said, they have a combined wealth of 458 billion ringit.

[00:09:39]And their wealth grew 100 billion ringit in just one year. And of course, that's because they took risk, they own businesses, they own a lot of shares.

[00:09:47]Fair. But if you look at the bottom 50% of Malaysians, the poorest 50% of Malaysians, which is about 16 to 17 million people, their total assets altogether, 17 million people, is only roughly the same as this richest 50 people. So yes, in this sense, a wealth tax kind of makes sense, right? That's what a lot of people are saying. We don't have to tax 30 million people. We only have to tax 50, 100 people. So why don't we do that? Now the reason I said that we have to be careful about this is that other countries have tried this before. This is not the first time that anyone in the world has considered this.

[00:10:23]For example, France, they ran a wealth tax back in 1989 and this lasted all the way until 2017 before they decided to abolish this. So there must be a reason that they did this, right? The reason for this is that rich people after seeing this just decided to leave. So there was a study that was done and they found out that over the 20 years that this wealth tax was there about €200 billion euros worth of assets left the country and because all of these people all of these assets are leaving the country the government lost out on about 5 billion euros in tax revenue. That is two times more than it got from the wealth tax in its entirety. So a net net negative for France. And of the 11 countries that have had a wealth tax in 1990, only three of them still have a wealth tax right now. And the countries are Switzerland, Spain, Norway. These countries, they still maintain it.

[00:11:15]Everyone else has stopped it. And even these three countries, they have it very low, between 0.5 to 1.5%. And here's the thing about Malaysia, right?

[00:11:25]billionaires, the richest people in Malaysia, if we go too aggressive, if we try to be so, you know, tax the rich, kill them, take all the money. The problem with that is that Singapore is right there. Singapore is so, so close by to Malaysia. And if you guys didn't know, Singapore is very, very friendly when it comes to taxes. They will welcome all the richest people in the world. They will promise a low tax. And because it's so close by, what's to stop the billionaires of Malaysia in just moving there? So, in my opinion, there are some things that can be done. There are some things that can't. For example, u in my opinion at least, capital gains taxes, those things can be taxed. Um, inheritance tax to me, yes, it seems kind of unfair. Why do I have to pay a tax just for inheriting someone's money?

[00:12:09]But if your inheritance is in the hundreds of millions or in the billions, then I think it's only fair that it's not kept in the family forever, it is at least partially going back to the people of Malaysia. And the final thing that I know a lot of people are saying is that, you know, why should we try and help the government save more money because at the end of the day, they're useless, right? They're not going to spend the money. Well, well, that is a very fair argument, but in my opinion, we can't use that to justify not doing anything about our current fiscal position. My proposal would be something like, you know, yes, the government can go ahead to cut petrol subsidies and share with Malaysians how much it's saving them.

[00:12:46]But when doing that, they need to be very transparent in terms of how they're going to use the money instead. So, for example, they can say, "Okay, T20s, no more subsidies. This is going to save us 2 billion a month or whatever it is. And this 2 billion ring, we're going to be very transparent. It's going to healthcare. It's going to education, etc., etc." This is something that a lot of people should be pushing for rather than saying, you know, they're not going to spend it well. Let's just not do anything about it. Now, enough of economics, enough of policies. These are all things that we cannot control. It's going to be completely up to the government. So, what can we do as individuals, especially for those of you guys who are in this T20 bracket who might be impacted? Number one is you should run your own booty 95 math. So, you guys know right now how much the petrol prices are, how much petrol you guys pump every single month. And even though yes, we are getting subsidies right now, you can sort of estimate how much extra you would have to pay per month. So right now we're all getting 200 L and a subsidy I think is about two ringit per liter. So in the worst case scenario if you really use more than 200 L a month you'd be paying an extra 400 ringit. I think a more realistic figure for most people um I think not everyone drives 200 L per month. So more realistic is around 100 to 150 which means that you should be budgeting for an increase in your petrol cost by about 200 to 300 ringit every single month.

[00:14:03]The next step is, as usual, build your buffer. Save up for an emergency fund if you don't have one already. There are a lot bigger concerns aside from just this petrol subsidy. This whole Iran war, petrol prices going up, AI, and stuff like that. It could lead to job losses.

[00:14:18]I did make a video about that. You can check it out over here. So, yeah, prepare for this. Save up your emergency fund 6 months, 12 months, whatever you can do. Pay off your high interest debt and just make sure that you're saving as much money as possible. And then the final thing that you can do is to get your data hygiene in order. So you want to make sure that you are filing your taxes correctly. You want to make sure that your secret scores are all correct and there's nothing funky in there. You know the worst thing that can happen is your previous salary was let's say 200,000 a month. Right now you're starting your own business. You're only earning 40,000 ringit a year and you decide you know hey I don't need to pay taxes so let's just not file income taxes. The thing is, if your last reported um income to LHDN was 200,000 a year, that is all they will know and they're going to assume that you're still making that right now. So, make sure you keep all these things updated because the worst thing that can happen is that, you know, you're not actually a T20, but then you lose your subsidies.

[00:15:11]Of course, these things can be appealed and stuff like that, but you don't want to go through that hassle. So, just make sure everything is up to date. So, yeah, this is basically where I land on this entire debate. I do acknowledge that the government has to do something about the skyrocketing subsidy bill, right? But I do think that they need to think a bit more carefully, blanket T20 across the board, maybe if they really have to. But I feel like they should start a bit higher if possible. And I think they need to be a lot more accountable and a lot more transparent when it comes to explaining where the savings are going to go instead. Let me know what you guys think about this entire thing in the comments below. I hope this video was educational to you guys and I hope that you guys enjoyed it. Hit a huge thumbs up if you did. Subscribe to my channel if you haven't already. See you guys in the next one.