DEVELOPING AN ENVIRONMENTAL TAX FRAMEWORK FOR MALAYSIA: LEARNING FROM VIETNAM’S ENVIRONMENTAL TAX IMPLEMENTATION EXPERIENCES
HASNU, NORFAKHIRAH NAZIHAH MOHD
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Malaysia’s position in the Environment Performance Index is decreasing every year. In 2018, Malaysia ranks 75th out of 180 countries compared to 63rd in 2016 and 51st in 2014. Malaysia’s weakening performance was due to several environmental issues including increased in air pollution, higher environmental risk exposure, poor drinking water quality, decreased in fish stocks and higher risk in biodiversity and habitat. One of the most efficient and effective ways to promote green growth is the use of environmental tax. Environmental taxes are policy mechanisms designed to increase the price on activities and products that are harmful to the environment. In theory, environmental tax can improve ultimate economic efficiency by imposing tax burdens that offset the general costs that certain goods and production impose on the economy through detrimental emissions (i.e. emissions that impose costs on national or global populations because they are toxic or contribute to global warming). By requiring these external costs to be recognized in the total costs of production, long-term economic efficiency can be enhanced. Many countries around the world has included environmental tax into the tax system including Switzerland, France, Denmark and Sweden. For developing countries, Vietnam and Thailand are some of the exemplary countries that have successfully implemented environmental tax. This study aims to explore Vietnam environmental tax policies and experiences. Vietnams’ experience in environmental tax implementation was a lesson to Malaysia to carefully design a workable and organised environmental tax framework. The environmental tax framework will help the government to reduce and resolve environmental issues. At the same time, environmental tax will be a new source of tax income to the country. With the abolishment of Goods and Services Tax and reintroduction of Sales and Services Tax in 2018 and current economic crisis due to Covid-19 pandemic, it is important for Malaysia to widen its tax income sources which environmental tax has proven to be one of the significant sources of income to many countries.