Why Target the Rich?

 

The Malaysian government is trying hard to find a solution to the petrol and diesel subsidy bill that has exploded tenfold. The most attractive political targets are “the rich”. Taking away subsidies from the wealthy feels socially equitable and satisfies public envy with “Robin Hood” economics. The political quick fix is rarely the most effective economic solution.

 

T20 = the top 20% of Malaysian households by income. Nationally, that starts somewhere above RM12,679 a month. But that’s a national cutoff; each state has its own income distribution, which means the bar is different depending on where you live. The most reliable state-level number DOSM gives us is the D9 median; the midpoint income of households in the 9th decile, which is the lower half of T20. If your household earns around this amount, you’re solidly in the top 20% of your state.

 

Source: https://www.wikihow.com

 

So what’s the number for your state?

 

State	“You’re T20 here if you earn around…”
W.P. Putrajaya	RM21,570
W.P. Kuala Lumpur	RM19,494
Selangor	RM18,105
Johor	RM14,590
Pulau Pinang	RM14,016
W.P. Labuan	RM13,316
Melaka	RM13,241
Negeri Sembilan	RM11,348
Sarawak	RM11,150
Terengganu	RM11,015
Sabah	RM10,709
Perak	RM9,567
Pahang	RM9,167
Perlis	RM9,135
Kedah	RM9,107
Kelantan	RM8,296

Based on D9 median household gross income, DOSM Household Income Survey 2024.

 

Selangor’s D9 median is RM18,105. Kelantan’s is RM8,296. That means the income that makes you top 20% in Kelantan is less than half of what you’d need in Selangor for the same status. Same country, very different reality.

 

KL and Putrajaya sit even higher, but they’re a bit of an outlier; small populations heavily skewed towards senior civil servants, executives, and corporate professionals. Not really representative of a typical state.

 

T20 isn’t one thing. It splits into two halves; D9 and D10 and the gap between them is significant. Take Selangor. D9 median is RM18,105. D10 median? RM28,901. That’s a RM10,000 jump between the two halves of the same bracket. In KL, D10 hits RM31,816. This is why you’ll often see T20 averages quoted much higher than medians; a layer of very high earners at the top of D10 pulls the average up. The median is the more honest number for most people. These are household numbers, not individual salaries. It’s gross income.

 

You cannot target the “rich” efficiently or effectively. Relying on the T20 classification is flawed because a household may fall into the T20 bracket collectively but the individuals within it, stay-at-home parents or children, have little or no personal income. Second, the MyKad, technology cannot identify these individuals at the pump and the Padu system is incomplete. Third, factoring in net disposable income shrinks the “no subsidy” group significantly.

 

If the goal is fairness and efficiency, tiered pricing, like we have for electricity is better. Instead of a binary “yes or no” based on income brackets, we should make the transition to a use-based model where the more petrol you use, the less subsidy you receive. For instance, a full subsidy could apply to the first 100 litres per month. The next 50 litres could be subsidised at 50% and the next 50 litres at 25%. Above 200 litres, the market rate would apply. This system is naturally progressive. Low-income groups, who typically buy less fuel, would enjoy full subsidies. Wealthy individuals with high-consumption vehicles would pay more but importantly, they are given the choice to economise.

 

If a T20 individual chooses to drive a fuel-efficient car or drive less, they can benefit from the baseline subsidy too. This solves the identification problem and focuses on consumption behaviour rather than flawed income data.

 

Remember, the top 15% of earners contribute 80% of total individual income tax. In contrast, those earning below RM100,000 annually contribute only 14%. When you factor in consumption taxes and investment taxes, the wealthy are already the primary contributors to government revenue. High taxes act as a disincentive to work and drive talent and entrepreneurs toward low-tax jurisdictions. We risk losing the very human capital needed to make Malaysia a high-income nation.

 

It is time for a fresh look at revenue that moves beyond the “Groundhog Day” debate of SST versus GST. The latter, while transparent, is often preferred by businesses because they can reclaim it, ultimately leaving consumers, especially the poor, to bear the cost. Instead, we should look at the modern reality of our economy.

 

Over 80% of transactions are now electronic, totalling RM1.4 trillion annually. A tiny electronic payments tax (EPT) of just 1% on both buyers and sellers could raise RM14 billion. The rate is low because the tax base is so massive. It is easy to collect at the point of sale, nearly impossible to evade and so small that it does not distort consumer behaviour or punish hard work in the way income tax does. If not as I have said before, do a Tobin tax, which levies a fraction of the forex transaction value each day and that accumulated will pay for the subsidies. Try to be creative, not roll-out measures that only irritate people!

 

References:

Why targeting the rich is not the silver bullet, Geoffrey Williams, Free Malaysia Today, 16 May 2026

 

Here’s How Much Malaysians Need to Earn to Be Considered T20, According To DOSM, WeirdKaya, 15 May 2026