Johor Regent Advocates for 25% Tax Revenue Return from Federal Government

KUALA LUMPUR — The Regent of Johor, Tunku Ismail Sultan Ibrahim, has reiterated his call for the federal government to return a larger portion of the state's income tax revenue, citing the urgent need for enhanced infrastructure and development in Johor. In a Facebook post dated July 22, 2025, Tunku Ismail highlighted that Johor contributes approximately RM48 to RM49 billion (equivalent to US$11.36 billion to US$11.59 billion) annually to federal coffers but only receives RM1.4 billion in return, a mere 2.85 percent of the total tax revenue generated.

The regent's statements come in the wake of significant project delays in the state, including the postponed phased opening of Pasir Gudang Hospital, which has been pushed back to January 2026. He expressed disappointment regarding this setback and underscored the need for a more significant return of funds to enable Johor to better manage its own development needs.

"When 25 percent of Johor’s income tax revenue is returned to Johor, the state can stand on its own feet," Tunku Ismail stated. He emphasized that such a financial adjustment would alleviate the burden on the federal government and streamline the approval processes for local projects, which often involve lengthy waits for federal consent.

Tunku Ismail's comments are part of a broader narrative surrounding state versus federal revenue sharing in Malaysia. According to a report from the ISEAS-Yusof Ishak Institute published in December 2023, state governments received an average revenue of RM926 per capita in 2022, compared to RM8,969 per capita received by the federal government. This disparity raises concerns about equitable resource distribution and the ability of state governments to fund their development initiatives.

In previous comments, Tunku Ismail has likened Johor's financial dependency on the federal government to a form of beggary, arguing that the state deserves to be treated as a partner rather than a subordinate. He has advocated for Johor to retain 20 to 30 percent of its tax revenue, urging the federal government to reassess its fiscal policies.

The call for a larger tax return is not isolated to Johor. In June 2025, Penang's Chief Minister Chow Kon Yeow also urged the federal government to consider returning 20 percent of tax revenue to the state, citing similar grievances about inadequate federal allocations despite high contributions to the national treasury. Additionally, Sabah has long sought to reclaim its constitutional entitlement of 40 percent of its revenue, which it argues is essential for its economic development. The Sabah Law Society has even initiated legal proceedings in this regard.

As Malaysia navigates its federal-state revenue-sharing framework, the ongoing discussions reflect growing tensions and calls for reform among the states. The implications of these developments could significantly affect the political landscape and fiscal policies in the country moving forward, raising questions about how revenue-sharing arrangements may evolve to promote equitable development across Malaysia's diverse states.