Deloitte expects environmental taxes to be introduced

KUALA LUMPUR: Deloitte Malaysia expects environmental tax policies to be introduced over the next few years in Malaysia as part of the country’s efforts to achieve its targets under the UN Sustainable Development Goals plan and to be a netzero greenhouse gas (GHG) emissions nation by as early as 2050.

Its tax leader, Sim Kwang Gek, said currently Malaysia offers tax incentives to encourage the adoption of green practices and green investments by businesses.

“While we should incentivise efforts in going green, environmental taxes may be introduced to prevent deterioration of our environment and encourage corporates and consumers to make sustainable choices,” he said in a statement yesterday.

The United Kingdom (UK), for example, has a number of environmental taxes such as Climate Change Levy, Landfill Tax, and Plastic Packaging Tax in an effort to meet its climate change objectives by 2050, Sim noted.

Singapore has set out a roadmap for its carbon tax rate hike to meet its carbon neutral pledge, with the country’s carbon tax will be increased by five times from SG$5 to SG$25 per tonne of GHG emissions in 2024, followed by SG$45 in 2026, before reaching SG$50 to SG$80 per tonne by 2030.

He said Malaysia may consider similar measures to encourage businesses and consumers to adopt a behavioural change towards sustainable choices.

“The announcement of a voluntary carbon market in Budget 2022 was a welcome proposal and may be implemented alongside other tax measures such as carbon tax to drive climate change objectives.

“Implementation of the carbon tax must take into consideration overall costs burden to businesses, especially small and medium enterprises (SMEs), legal framework as well as availability and reliability of data,” he said.

Malaysians reportedly dump over 30,000 tonnes of plastic waste into the sea yearly and are ranked eighth among nations that mismanage plastic waste.

Sim said where electronic waste (e-waste) is concerned, Malaysia produces more than 365,000 tonnes of such waste annually and it is expected to grow rapidly due to the increasing usage of electronic devices.

In a report issued jointly by the World Bank and the Ministry of Environment and Water, Malaysia, which is a member of the Asia-Pacific Economic Cooperation (APEC) is currently developing the Extended Producer Responsibility (EPR) legislation for packaging as part of its 12th Malaysia Plan.

The Organisation for Economic Co-operation and Development (OECD) defines EPR as an environmental policy where a producer’s responsibility for a product is extended to the postconsumer stage of a product’s life cycle.

A holistic tax framework must be considered to ensure the successful implementation of EPR in Malaysia, he added.

“Issues such as tax treatment on the deductibility of EPRrelated costs incurred by the producers, contribution of EPR fees by businesses, and taxability of such receipts must be ironed out.

“A full tax deduction on the costs and exemption on the receipts, subject to certain parameters, should be accorded,” Sim said.

He noted that Environmental, Social, and Governance (ESG) is one of the top agendas in boardroom conversations now and an important consideration in setting the business strategy moving forward.

The 2023 Pre-Budget Statement emphasises the need for inclusive development, green growth, sustainable development, and strong governance.

While we should incentivise efforts in going green, environmental taxes may be introduced to prevent deterioration of our environment and encourage corporates and consumers to make sustainable choices. Sim Kwang Gek