THE 10th ISLAMIC BANKING, ACCOUNTING AND FINANCE INTERNATIONAL CONFERENCE 2022 (iBAF 2022)

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Islamic Banking, Accounting and Finance International Conference - The 10th iBAF 2022

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THE 10th ISLAMIC BANKING, ACCOUNTING AND FINANCE INTERNATIONAL CONFERENCE 2022

(iBAF 2022)

Public Views on Post-Pandemic Economic Recovery Strategies and Carbon Tax Implementation

(Extended Abstract)

Izlawanie Muhammad, Norfakhirah Nazihah Mohd Hasnu, Mohd Adha Ibrahim, Suhaila Abdul Hamid and Mustafa Mohd Hanefah

Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia E-mail: [email protected] (corresponding author)

1. INTRODUCTION

The worldwide economy and financial markets have been badly impacted by the COVID-19 pandemic. The disease has a number of adverse effects, including substantial income declines, an increase in unemployment, and disruptions in the manufacturing, service, and transportation sectors (Gnangnon, 2021). As poverty rates rise, the pandemic issue would have a substantial impact on middle-income countries, which may house 82 percent of the new poor⁵ (World Bank, 2021). The COVID-19 economic recovery strategy in Malaysia and developing nations should concentrate on fiscal and financial matters and incorporate a green economy approach to producing money while safeguarding the environment.

2. MATERIALS AND METHODS

The Paris Agreement mandates the reduction of increased greenhouse gas (GHG) emissions with the goal of limiting the increase in the global mean temperature to less than 2°C by 2050, ideally less than 1.5°C (United National Framework Convention on Climate Change, 2015). Policymakers need to establish a sustainable environmental policy in order to meet the objective for the mean temperature. Many countries, including Malaysia, are paying increasingly serious attention to the carbon tax among the numerous methods of environmental policy. The Malaysian Prime Minister has assertively announced a carbon tax in the 12th Malaysian Plan (2021-2025). However, implementing the carbon tax policy is more challenging in the COVID- 19 economic recovery plan.

When the COVID-19 strike, the Malaysian government allocated RM45 billion for COVID-19 Fund for three years ending 31 December 2022. The fund is for several packages comprising the economic stimulus package, food security programme, cash assistance to the public, and subsidies, incentives and loans for small and medium enterprises (Ministry of Finance, 2020). Without a feasible economic recovery plan, unemployment would remain significant, the federal government deficit would be growing, and external debt would continue to be high. This paper aims to explore public views on post-pandemic economic recovery strategies and carbon tax implementation.

A quantitative research methodology is adopted in this study. The public was asked about their:

1. views on the most important priorities for the Malaysian government coming out of the pandemic 2. preference for primary policy instrument to address climate change

3. how the government should spend the revenue from carbon tax collections if the policy is implemented A Google Form-built questionnaire was used to collect the data. On social media, the form was disseminated via Facebook and Instagram, as well as messaging services like WhatsApp, Facebook Messenger, and Telegram.

Several enumerators distributed the questionnaire to each of Malaysia's 16 states.

5The new poor means people who are more urban than the chronic poor, more engaged in informal services and manufacturing and less in agriculture and live on congested urban settings and work in the sectors most affected by lockdowns and mobility restrictions (World Bank, 2021b).

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3. RESULTS AND DISCUSSIONS

After two months of data collection, 566 respondents completed the survey. The majority of the respondents are between 21-39 years old (66.6%), have a Bachelor’s degree (47.9%), have full-time employment (49.6%), receive a monthly gross income less than RM1,200 per month (39.6%), female (71.2%), Malay (87.6%) and live in Negeri Sembilan (18.2%).

The results of the survey are shown in Table 1. The majority of the respondents perceived that the government should focus on assisting businesses to grow again. This is followed by ensuring children reach their learning targets, resolving political crises and making sure less pollution by the public. Only 10% of the respondents preferred the government to increase its revenue through a broader tax base.

When asked about policy instruments to address the climate change issue, the top three preferences by the public are the government’s enactment of environmental regulations, public campaigns and subsidies for environmentally friendly activities. Implementation of a carbon tax is the least preferred policy.

Regarding allocation of carbon tax revenue if the government finally implemented the policy, 26% of the respondents prefer the revenue to be spent for investment in green technology solutions. While 23%, 20% and 16% of respondents suggest that the collection should be kept as a general income, given back to the low-income group and used to reduce the national debt respectively. The least preference is to fund a reduction in individual taxation.

Table 1. Public Views on Post-Pandemic Economic and Social Strategies and Carbon Tax Implementation

Question Percentage

a) Views on the most important priorities for the Malaysian government coming out of the pandemic

Getting businesses back on their feet 29%

Ensuring children reach their learning targets 27%

Resolving political crises 17%

Making sure public/businesses don’t increase air, water and other pollution 17%

Making sure government increase its revenue through a wider tax base 10%

b) Preference for primary policy instruments to address climate change

Enacting regulations that seek to protect the environment 28%

Organising public campaigns that promote environmental consciousness 22%

Providing individuals and firms with subsidies for environmentally friendly activities 19%

Integrating climate change education into the school curriculum 18%

Enacting carbon tax 13%

c) How the government should spend the revenue from carbon tax collections if the policy is implemented

Investment in green technology solutions 26%

Kept as general government income (health, education, defence, facilities) 23%

Give back to B40 society in terms of Bantuan Keluarga Malaysia (BKM) 20%

Reducing the national debt 16%

Funding a reduction in individual taxation 15%

4. CONCLUSION

For an environmental tax to be effective and sustained, gaining public support is essential. The policy is expected to encounter major challenges during implementation and might not continue long enough to have the desired effects on the economy and environment without the support of the public. This study is among the few limited studies exploring public views on post-pandemic economic recovery strategies and Malaysia's proposal of carbon tax implementation. Results show that the public wants the government to focus on rebuilding the nation’s socio-economy before widening its tax base. A carbon tax is the least preferred strategy in resolving climate change issues. If the government finally implement the policy, the tax collection should be used for green technology solutions. Future studies should examine public acceptance behaviour after the carbon tax is finally implemented in Malaysia.

Acknowledgement

The researchers want to thank Institut Masa Depan Malaysia (MASA) for funding this research under the MASA Policy Development Programme (MPDP) grant.

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141 References

Gnangnon, S. K. (2021). Poverty volatility and poverty in developing countries. Economic Affairs, 41, 84–95.

https://doi.org/10.1111/ecaf.12445

Ministry of Finance. (2020). Monetary and Financial Developments. Economy Outlook.

https://www.mof.gov.my/portal/arkib/economy/2020/chapter4.pdf

United National Framework Convention on Climate Change (UNFCCC) (2015) Paris Agreement.

https://unfccc.int/sites/default/files/english_paris_agreement.pdf. Accessed 22 March 2021 World Bank. (2021b). Understanding Poverty. https://www.worldbank.org/en/topic/poverty/overview#1