Based on the 2025 Federal government financial statements, tax refund commitments have decreased by RM 3,425 million from RM 33,342 million in 2024 to RM 29,919 million in 2025. Credit must be given the Inland Revenue Board(LHDN) for reducing the amount owed to companies that had paid excess taxes to the government.
However, the nearly RM 30 billion owed by the government to companies that paid excess taxes is still large by any standards, especially when these are the companies’ own money. In 2026, RM 9 billion was paid to 130,000 companies by 30 September 2026. The government must quickly pay back companies, especially the 1.2 million SMEs, their own monies to help them overcome any liquidity shortfalls.
Tax refund commitments should be capped at RM 10 billion. Tax refund commitments of RM 30 billon is a burden to companies squeezed for cash, especially SMEs facing deteriorating business conditions and an uncertain global economy. Tax refund commitments were lower at RM21,836 million in 2021 before increasing to RM 25,721 million in 2022 and RM 25,511 million in 2023.
Those responsible for SMEs and holding statutory positions to help SMEs should do their job to press the government to increase tax refunds. Failing to consistently and persistently press the government to return back to SMEs their own money, may give the unfortunate impression that those responsible and holding statutory positions are “sleeping on the job”.
There has been progress in making the annual 2% compensation payments required under Section 111D Income Tax Act for any delays by LHDN in refunding excess taxes paid. In 2025, RM 23.64 million was paid whilst for the first 9 months of 2026 until 30 September, LHDN has already paid RM 109 million in 2% compensation payments – an increase of nearly 5 times.