KUALA LUMPUR (June 9): Carbon tax in Malaysia should happen in the future but it is a wait-and-see approach for now with many aspects to look into, tax experts said at the Malaysian Institute of Accountants (MIA) International Accountants Conference 2022 on Thursday (June 9).

MISC Bhd head of group tax Narendran Yahambaram said the government has been using the “carrot” approach in terms of implementing environmental taxes by providing incentives and grants. 

He said the government has recently looked at the “stick” approach with the introduction of the carbon tax in the 12th Malaysia Plan 2021-2025 (12MP).

“Carbon tax is tabled in the proposal of 12MP, in line with the target of zero emissions. We need both the carrot and stick approach and carbon tax is the stick approach. 

“In Malaysia, over the last few years, there were significant situations where there was pollution on water resources and it had a significant social impact. 

“Carbon tax will happen in just a matter of time. But the world is going through unprecedented times, so we wait and see when it will be implemented,” Narendran said.

Dr. Veerinderjeet Singh, the immediate past president of the Malaysian Institute of Accountants (MIA), agreed, saying Malaysia has given incentives in the past, which motivated corporations to use energy efficient equipment and machinery. 

He also shared a mutual view of holding a wait and see approach, adding that the government has yet to tax polluters too. 

“Will Malaysia introduce a carbon tax in the future? Perhaps we will wait and see. Eventually, it makes sense but perhaps sometime down the road. 

“We are conscious that our manufacturing sector uses a lot of resources which could be pollutants; when can they transition? It caused the usual outcry of impact on the bottom line.

“We haven’t started taxing the polluters. That is maybe something that may happen in the near future, although I do see political issues there, but ultimately that is the way to go,” Veerinderjeet said.

Narendran was one of the speakers of the virtual session titled “Aligning Tax Strategy and ESG”, while Veerinderjeet moderated the session. 

Narendran believes that the ESG principles will remain for the long term, as well as tax within ESG context, but highlighted that strong fundamentals need to be in place. 

“Tax governance is not a box ticking exercise; it needs infrastructure, willingness of management to share certain tax transparency, in-house tax team and service providers to have resources available,” he said. 

He added that there must be clarity on the channelling of the carbon tax collection. 

“If carbon tax or any other environmental tax is imposed, is that tax a form of raising finances for a country or are those taxes going to be channeled to rectify the environmental damage. 

“Will it be taken to reward companies that do good for the environment or does it just go into a bigger pool of finances for the country?” he said. 

Narendran highlighted that tax transparency (under “S” of ESG) is also important, along with the implementation of carbon and environmental tax (under “E”) and tax governance (under “G”).

“The other important part in implementing the carbon tax is awareness and transparency to the consumers, as they need to realise or have information when they buy the product of a company that has high environmental taxes, so the power is thrown back to the consumers ultimately,” he said.