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Progressive Wealth Tax: A Pathway to Greater Equity and Fiscal Stability

  • Aug 18
  • 8 min read

Prepared by Muhammad Daniel Kittu

18 August 2026



Cost-of-living pressures are no longer a seasonal complaint; they are a structural crisis. A recent policy brief by the Social and Economic Research Initiative (SERI) revealed that prices for common staples like nasi lemak, white rice, and roti canai have surged by up to 48% in real terms over the past decade [1].  As geopolitical instability, exemplified by the war in Iran, threatens to further disrupt supply chains, Malaysia faces a fiscal crunch. Measures ranging from reducing subsidised fuel quotas to proposals to cut ministry budgets have been mooted to manage the crisis [2],[3]. Amid these challenges, progressive wealth taxes represent a promising yet often misunderstood solution.


Criticisms of wealth taxes include [4], [5], [6], [7]: 


  1. The rich (i.e. T20) already bear most of the tax burden

  2. The rich will always be able to hide or move their wealth to avoid taxes

  3. Valuing such assets is not feasible for tax administrators


To appreciate the value a progressive wealth tax can bring as a fiscal tool for governments to raise revenue and reduce inequality, these misconceptions need to be addressed. 


Misconception #1: A Progressive Wealth Tax Will Exacerbate The T20’s  High Tax Burden 


A progressive wealth tax would not target the T20 as a whole, but would specifically target extreme concentrations of capital rather than high earners who may still face some liquidity constraints. The T20 in Malaysia indeed bears most of the tax burden, particularly in terms of income tax; however, the definition of the T20 group is problematic as gross household income is used as the sole benchmark [7], which does not reflect the real financial positions of households, especially with the wide variability of living costs across Malaysia. A  household earning RM 14,000 per month in Kuala Lumpur would face a much higher cost of living than another household with the same income in Perak. 


Moreover, little attention is paid to disparities within the T20 itself. According to the Department of Statistics Malaysia (DOSM), a gross monthly household income of RM 12,680 is needed to enter the T20 category, with the median and average at RM 16,517 and RM 20,662, respectively [8]. A median household income of RM 16,517 means that half of T20 households earn below this amount, and the other half earn above it. The average income is higher at RM 20,662, indicating that the ultra-wealthy among the T20 pull up the average, pointing to notable intra-group inequality.


Notwithstanding these issues, a progressive wealth tax would not impose an additional burden on the vast majority of the T20. Crucially, wealth taxes target net worth, not income. For example, a proposed 2% wealth tax on the top 100 would not apply to most T20 households, which number around 1.46 million [9]. Taxing just the top 100 richest individuals could raise between RM9 and RM9.5 billion annually [5]. 


An alternative would be to impose a wealth tax on the richest top 1%, as has been advocated globally. Using the wealth tax revenue calculator modelled by researchers from the Tax Justice Network with data from the World Inequality Database, an estimated RM15.73 billion ($3.88 billion) in additional revenue would be generated annually [10]. As only the top 1% are affected, this revenue would be generated from approximately 235,690 wealthy individuals. This significant revenue stream would not affect the broader T20 population while providing much-needed funds for public services.


Misconception #2: The Rich Can Just Hide or Transfer Their Assets, Thus Harming The Economy


A common concern of implementing wealth taxes is that the wealthy can simply move their assets abroad. However, evidence suggests this problem is overstated. Economists using datasets on leaked customer lists from offshore financial institutions matched to administrative wealth records in Scandinavia found that only 0.01% of the richest households evade 25% of their taxes, and they are more likely to hide their assets than the bottom of the top 1 per cent [11]. 


A related point is that it is often claimed that the wealthy can just move overseas to avoid higher taxes, when reality is more complex. A 13-year study drawing on administrative tax returns of all US million-dollar income-earners found that millionaire tax flight is minimal, with a population elasticity of roughly 0.01, an effect so small that a 10% increase in the top tax rate leads to only a 1% loss of the millionaire population [12]. Family ties, education access, and economic stability weigh more heavily than tax rates in these relocation decisions.


In the Malaysian context, countries that most Malaysians move to are Australia, the United States, the United Kingdom, Canada and Singapore [13], [14]. All except Singapore have a higher top marginal tax rate than Malaysia’s 30% [15], [16], further supporting the argument that individuals do not migrate primarily due to tax rates but rather due to a combination of factors such as education and economic opportunities. Instead of fearing an exaggerated wealth exodus, Malaysia should recognise that the revenue from such taxes can be invested in public services that help retain talent by raising the quality of life through better public transport infrastructure, education and healthcare. 


Contrary to the claim that wealth taxes harm the economy, they can in fact contribute to economic growth and incentivise more productive investment. Research utilising US tax records from 1963 to 2019 systematically traced household savings through the financial system to identify the ultimate assets they finance. The study documented the emergence of the “saving glut of the rich”, which financed household borrowing before 2008 and government deficits thereafter, rather than productive capital investment [17]. A wealth tax would ensure that less productive entrepreneurs are taxed similarly and shift the tax burden to them by pruning the wealth of idle entrepreneurs and boosting that of successful ones, which can be described as having a “use-it-or-lose-it” effect [18]. 


While the threat of a wealth exodus from a progressive wealth tax is overstated, precautionary measures can be taken to mitigate this rather than avoiding its implementation. At a national level, exit taxes or tax obligations can be imposed on former residents for a specified period after they move abroad [19]. Countries such as Denmark, Spain, Sweden, Germany and France have imposed some form of exit taxes as well [5], [20]. Implementing such a measure is achievable and can allay any fears of the wealth created in Malaysia migrating elsewhere without contributing back to Malaysian society. 


Other important measures can include international collaboration and establishing full beneficial ownership transparency, at least at a national level. Moving towards full beneficial ownership transparency for all types of companies and assets should accompany progressive wealth taxes, as it ensures that government officials know the beneficial owners of all companies and assets. It would facilitate the effective enforcement and administration of the wealth tax and also mitigate many other types of illicit financial flows, including money laundering, corruption, terrorist financing, and drug trafficking [10]. Implementing this would be in line with the Madani Government’s anti-corruption efforts and would facilitate the effective implementation of a progressive wealth tax. 


Misconception #3: Valuing Wealth is Too Difficult

The argument that valuing diverse assets like art, real estate, and private equity is too complex for tax administrators often ignores global practice. Many other countries, including Spain, Switzerland, Sweden and Norway, have successfully implemented wealth taxes with functioning valuation systems [5], [10]. Some complexity exists, but it is not insurmountable. For example, Malaysia could establish asset registers similar to Sweden’s land and financial registries, which track ownership transfers, capital income, dividends, and financial securities. This involves assessments conducted annually, with most wealth components being third-party reported for financial and real estate assets, as well as liabilities, and the Swedish government uses market prices from stock and real estate markets to value those assets [21]. 


Moreover, the administrative challenge is mitigated by the extremely small number of taxpayers involved. Unlike income tax, which requires monitoring millions of transactions, a wealth tax on the ultra-rich, such as on the top 100 richest Malaysians or top 1%, involves a relatively tiny, identifiable cohort. 



The Pathway to a Healthier Society

With these misconceptions addressed, progressive wealth taxes emerge as a vital fiscal and policy tool to improve well-being. A briefing paper by the United Nations University International Institute for Global Health (UNU-IIGH) notes that such a well-designed tax system reduces socio-economic inequalities, which are a primary driver of chronic stress and poor health outcomes [22]. By funding public goods such as better healthcare, education, and transport, a progressive wealth tax strengthens the social contract between the state and its citizens.  This overall improvement in Malaysian society will benefit all Malaysians, from the B40 to the T20. 


Geopolitical volatility and rising living costs demand new fiscal tools that do not rely solely on consumption and income taxes. A progressive wealth tax is not an act of punishment against success, but a pragmatic necessity for justice and a dignified life for all Malaysians in the face of increasing global uncertainty. 


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