Enhancing Sustainable Development through Environmental Taxation: Challenges and Policy Recommendations for Malaysia
List of Authors
Mohamad Sayuti Md Saleh, Nur Atikah Mohamad, Shariful Amran Abdul Rahman, Wan Mohd Firdaus Wan Mohamed, Yusri Huzaimi Mat Jusoh
Keyword
Environmental, Carbon Tax, Green Investment Allowance
Abstract
This paper explores the role of environmental taxation in promoting sustainable development, with a specific focus on Malaysia, a rapidly developing nation facing both industrialization and environmental challenges. Environmental taxes, often referred to as green taxes, are increasingly recognized as effective tools for integrating ecological concerns into economic policies. The paper discusses how environmental taxes and tax incentives, such as exemptions and deductions for green technologies, help internalize environmental costs while fostering innovation and sustainable growth. However, the implementation of these policies in developing economies like Malaysia faces significant challenges, including lack of awareness, bureaucratic complexity, financial constraints, and resistance from industry stakeholders. Despite these barriers, Malaysia has introduced various tax-based incentives, such as the Green Technology Financing Scheme and Green Investment Allowances, to encourage eco-friendly practices. While these measures reflect the country's commitment to sustainability, their effectiveness remains hindered by insufficient enforcement and underutilization. The paper suggests strategies to improve the impact of Malaysia's environmental tax policies, including enhancing public awareness, simplifying administrative procedures, building public trust, and ensuring continuous policy evaluation. By addressing these challenges, Malaysia can better leverage environmental taxation to drive long-term sustainable development and economic growth. This study contributes to understanding how developing countries can design and implement more effective environmental tax policies in pursuit of their environmental and economic goals.