Govt should implement carbon tax to drive sustainable agenda

KUALA LUMPUR – The government should consider implementing a carbon tax to continuously drive the country’s sustainable agenda, said Deloitte Asia Pacific tax partner Mark Chan.

He said instead of imposing “Cukai Makmur” (prosperity tax) under Budget 2022, which is in effect for only a short-term period of one year, a carbon tax will be able to generate more revenue in the long run.

“Instead of Cukai Makmur, we should consider implementing the carbon tax that will be more in line with the country’s efforts in sustainability goals.

“I acknowledge that the carbon tax is a lot more complicated to implement but that is something we could look at in the longer term,” he said during a roundtable discussion on Budget 2022 at the Invest Malaysia 2021 Series 3, held online, on November 10.

Meanwhile, Chan said the proposed Cukai Makmur should be imposed based on the profitability of the companies instead of the size of its income.

He said the spirit of tax is supposed to look at companies that are performing exceptionally well and the government should be looking at taxing companies based on their incremental profits over the last two years.

Chan said as Cukai Makmur will only take effect for a short-term period, it is not advisable for companies to look at breaking up operations into multiple subsidiaries in order to mitigate the impact.

“Malaysia currently does not have a concept of group taxation and the determination of the RM100 million chargeable income will be on an individual company basis.

“If that (breaking up operations) is part of the larger plan to streamline the business, then it makes sense to bring forward the plan but if it was driven purely by tax I would not do that, as it is aggressive tax planning,” he added.

Institute for Democracy and Economic Affairs (IDEAS) chief executive officer Tricia Yeoh said Cukai Makmur will not support long-term revenue generation for the country.

“It could be a good one-off instance, as we think about short-term measures, but beyond this, the Ministry of Finance together with the government will still need to consider what would be a good longer-term initiative to generate broader base revenue.