The Acceptance of Best Practices in the Malaysian Environmental Tax Laws

379 Pages·2013·2.87 MB·English

INVESTIGATION INTO PUBLIC ACCEPTANCE OF ENVIRONMENT
PROTECTION TAX LAWS IN MALAYSIA

By
LOO CHOO HONG

Thesis Submitted in Fulfilment of the Requirements
For the Degree of Doctor of Philosophy (Management)
Universiti Tun Abdul Razak

September 2013

i
VERIFICATION PAGE

I certify that the Board of Examiner met on 04th July, 2013 to conduct the final
examination of Loo Choo Hong on his thesis entitled “Investigation into Public
Acceptance of Environment Protection Tax Laws in Malaysia” in accordance with
the University requirements. The Board recommended that the candidate be awarded the
degree of Doctor of Philosophy (Management). The members of the Board of
Examiners are follows:

Dr. Mohd Saeed Bin Siddiq
Professor
Universiti Tun Abdul Razak
(Chairman)

Dr. Ravindran Ramasamy
Professor
Universiti Tun Abdul Razak
(Internal Examiner)

Dr. Jeyapalan Kasipillai
Professor
Monash University
(External Examiner)

This thesis was submitted to the Senate of Universiti Tun Abdul Razak and has been
accepted as fulfillment of the requirements for the degree of Doctor of Philosophy
(Management). The supervisor is:

Dr. Barjoyai Bardai
Professor
Universiti Tun Abdul Razak
(Supervisor)

…………………………….
( )
Dean
Graduate School of Business
Universiti Tun Abdul Razak

Date:
ii
UNIVERSITI TUN ABDUL RAZAK

DECLARATION OF COPYRIGHT AND AFFIRMATION OF FAIR USE OF
UNPUBLISHED RESEARCH

Copyright @ 2013 by Loo Choo Hong. All rights reserved.

INVESTIGATION INTO PUBLIC ACCEPTANCE OF ENVIRONMENT
PROTECTION TAX LAWS IN MALAYSIA

No part of this unpublished research may be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic, mechanical, photocopying,
recording or otherwise without the prior written permission of the copyright holder
except as provided below.

1. Any material contained in or derived from this unpublished research may
only be used by others in their writings with due acknowledgement.

2. UNIRAZAK or its library will have the right to make and transmit copies
(print or electronic) for institutional and academic purposes.

3. The UNIRAZAK library will have the right to make, store in a retrieval
system and supply copies of this unpublished research if requested by
other universities and research libraries.

Affirmed by: Loo Choo Hong

Signature Date

iii
Abstract of the thesis presented to the Senate of Universiti Tun Abdul Razak in
fulfilment of the requirements for the degree of Doctor of Philosophy in Management.

Investigation into Public Acceptance of Environment Protection Tax Laws in
Malaysia

By
LOO CHOO HONG

ABSTRACT
This study looks at one of the many tools to promote environmental sustainability,
namelyenvironmental taxation. This research identifies the gaps between current
Malaysian tax laws and practices in the countries reviewed, as well as the desires of
Malaysian taxpayerswhich arenot practiced in other countries.Amixed-methodapproach
was used in this study. In the qualitative method focus groups and interviewsinvolving
30 experts from various disciplinesthoroughly exploredwhat taxpayers want from
environmental taxation laws. The quantitative approach entailed emailing a set of
questionnaires to more than 700 respondents. The researcher developed and tested the
environmental taxation acceptance model and its variables. In the model,the taxpayer
engages in voluntary compliance, forced compliance or non-compliance with
environmental tax laws.The findings show that education level, income source, domicile
status and political affiliation do not determine whether one supports environmental tax
issues; rather gender, age and race are significant determinants.Environmental taxation
does playa role in encouraging good environmental behaviour; however,it only
performing a supporting role in encouraging environmental preservation. Public
education about good environmental behaviour, enforcement of environmental laws and
supporting services should be practised along with environmental taxation laws.
Behavioural factors, such as quality of life, self-actualisation andattitudes, and legal
factors, such asimmediate tax incentives, forced compliance and tax mitigation, are the
underlying factors in the acceptance of environmental taxation by the Malaysian
taxpayer. Attitudes were the least important independent variable while quality of life
was the most important variable in the successful acceptance of environmental taxation.
This study highlights the impeding factors in the theoretical framework that might
change the outcome of acceptance of environmental taxation, includingamount of the
tax and the tax administration, current subsidy structure, culture, supporting
infrastructure, public goods and governance issues.

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The researcher introduced two theorems based onthis research. The Theory of Social
Rental Costproposes a method of transferring the environmental costs to the taxpayer
himself as expressed in the following equation:
R R - R
T = A C,
where R represents the rental of landfill charged to the taxpayer, R represents the
T C
rental earned by the government from current use and R represents the revenue
A
received by the authorities from alternate use. The Life of Pi Theorem proposes that
environmental taxation (or any other eco-friendly policy) will never restore nature to its
original glory. From time to time, man will sin against nature by destroying it, but he
could not complete the total destruction of nature. Environmental taxes are tools man
uses to atone for his sins against nature.

Keywords: environmental policy, taxation policies, environmentalism, Malaysian
government policies, philosophy
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ACKNOWLEDGEMENTS

I would like to thank Professor Barjoyai Bardai for his undivided and thorough
guidance and supervision and the scrutiny with which he edited this research proposal
and thesis many times. Without his guidance and expertise, this project would have
been not possible.
This research also could not have succeeded without the support of Ms
Deehbanjli Lakshmayya, Professor Madya, Dr Gideon Ong Hong Choon, Dr Tung Lai
Cheng, Mr Jeffrey Chew, Assistant Professor Alex Cheng Boon Liat, Professor N V
Narasimham and my wife Janet.
Thank you to all the experts, respondents and my editor at Scribendi. This work
is for you.

.

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Table of Contents

ABSTRACT ................................................................................................................ iv
ACKNOWLEDGEMENTS ......................................................................................... vi
Table of Contents ........................................................................................................ vii
List of Tables ............................................................................................................... xi
List of Figures ............................................................................................................ xiv
List of Abbreviations .................................................................................................. xv
Glossary ..................................................................................................................... xvi
CHAPTER 1 INTRODUCTION ................................................................................... 1
1.1 Background ............................................................................................................. 1
1.2 Research Focus ....................................................................................................... 3
1.2.1 Problem Statement ............................................................................................... 3
1.2.2 Research Objectives ............................................................................................. 3
1.2.3 Research Questions .............................................................................................. 4
1.3 Conceptual Framework ........................................................................................... 5
1.3.1. Schematic Diagram of the Conceptual Framework ............................................ 6
1.4 Research Hypothesis ............................................................................................... 9
1.5 Justification of the Study ...................................................................................... 10
1.6 Methodology ......................................................................................................... 11
1.7 Significance of the Study ...................................................................................... 12
1.8 Summary ............................................................................................................... 13
1.9 Organisation of the Thesis .................................................................................... 14
CHAPTER 2: LITERATURE REVIEW ................................................................... 17
2.1 Main Theories ....................................................................................................... 17
2.1.1 Pigouvian Tax .................................................................................................... 17
2.1.2 The Coase Theorem—Coase’s ‘The Problem of Social Costs’ ......................... 19
2.1.3 Social Accounting Theory ................................................................................. 20
2.2 Environmental Taxation and Vehicle-related Issues ............................................ 22
2.2.1 Vehicle Emissions Policies ................................................................................ 22
2.2.2 Carbon Tax on Vehicles .................................................................................... 24
2.2.3 Environmentally Friendly Vehicles ................................................................... 25
2.3 Environmental Policy ........................................................................................... 26
2.4 Tax Policies .......................................................................................................... 32
2.5 Payments for Environmental Services .................................................................. 39
2.6 Social Acceptance of Environmental Taxation .................................................... 40
2.7 Culture and the Environment ................................................................................ 47
2.8 Motives behind the Introduction of Environmental Taxes ................................... 48
2.9 Econometric Studies of Environmental Taxation ................................................. 52
2.10 Employment and Environmental Taxation ......................................................... 56
2.11 Emissions Trading .............................................................................................. 56
2.12 Best Practices in Environmental Tax Laws ........................................................ 69
2.13 Studies of Sustainability in Malaysia ................................................................. 69
2.14 Previous Research on the Acceptance of Environmental Taxation .................... 72
2.15 Research Gaps .................................................................................................... 74
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2.15.1 Specific Research Gaps ................................................................................... 76
2.16 Building the Issues in the Literature Review into Hypotheses ........................... 77
2.17 Summary ............................................................................................................. 80
CHAPTER 3: RESEARCH METHODOLOGY ....................................................... 85
3.1 Research Objectives and Questions ...................................................................... 85
3.2 Hypotheses ............................................................................................................ 86
3.3 Conceptual Framework ......................................................................................... 87
3.3.1 Environmental Taxation Acceptance Model ..................................................... 88
3.4 Research Approach and Process ........................................................................... 95
3.4.1 Research Phases ................................................................................................. 95
3.4.2 Justification for the Mixed-method Approach ................................................. 102
3.4.2 Respondent Selection ....................................................................................... 103
3.4.3 Business Community ....................................................................................... 103
3.4.4 Selection of Business Community Respondents ............................................. 104
3.4.5 Interest Group Respondents ............................................................................. 104
3.5 The Qualitative Study ......................................................................................... 106
3.5.1 Interviews ........................................................................................................ 106
3.6 Quantitative Study .............................................................................................. 108
3.6.1 Administration of the Questionnaire ............................................................... 110
3.7 Pilot Study .......................................................................................................... 113
3.7.1 Initial Interviews and Focus Group Study ....................................................... 113
3.7.2 Qualitative Pilot Studies .................................................................................. 115
3.7.2.1 Initial 2010 quantitative study ...................................................................... 116
3.7.2.2 2012 Pilot study. ........................................................................................... 118
3.7.2.2.1 2012 Pilot study Validity and Verification ............................................... 119
3.8 Summary ............................................................................................................. 122
CHAPTER 4: LEGAL REVIEW .............................................................................. 123
4.1 Historical Perspective ......................................................................................... 123
4.1.1 Malaysia ........................................................................................................... 123
4.1.2 United Kingdom .............................................................................................. 125
4.1.3 Australia ........................................................................................................... 126
4.1.4 The People’s Republic of China and the Hong Kong Special Administration
Region of China (HKSAR) ....................................................................................... 128
4.1.5 Indonesia .......................................................................................................... 131
4.1.6 Sweden and the United Kingdom .................................................................... 131
4.1.7 Republic of Ireland .......................................................................................... 132
4.1.8 International Community ................................................................................. 132
4.2 Current Malaysian Environmental Tax Law and Commentary .......................... 133
4.2.1 The Energy Sector ........................................................................................... 133
4.2.2 Green Buildings ............................................................................................... 136
4.2.3 Transportation Sector ....................................................................................... 137
4.2.4 Public Transport ............................................................................................... 138
4.2.5 Plastic Bags and Bottles................................................................................... 138
4.2.6 Landfill Levies ................................................................................................. 139
4.2.7 Waste Recycling .............................................................................................. 139
4.2.8 Water and Sewage Disposal ............................................................................ 142
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4.2.9 Storage, Treatment and Disposal of Toxic and Hazardous Wastes ................. 142
4.2.10 Used Oil Recycling ........................................................................................ 143
4.2.11 Deposit-refund System .................................................................................. 143
4.2.12 Employment Taxation ................................................................................... 144
4.2.13 Certified Emissions Reduction Units............................................................. 144
4.2.14 Forestry and Land Management Incentives ................................................... 144
4.2.15 Environmental Protection Equipment ............................................................ 145
4.2.16 Other Measures .............................................................................................. 146
4.3 Answering the Research Questions .................................................................... 146
4.4 Implications of the Legal Review for Malaysia ................................................. 149
4.5 Summary ............................................................................................................. 151
CHAPTER 5: QUALITATIVE RESEARCH .......................................................... 155
5.1 Methodology ....................................................................................................... 155
5.1.1 Interviews ........................................................................................................ 155
5.1.2 The Experts ...................................................................................................... 156
5.1.3 Software Analysis ............................................................................................ 158
5.2 Findings .............................................................................................................. 164
5.2.1 Implications from the Tree Map ...................................................................... 164
5.2.2 Answering the Research Questions ................................................................. 167
5.2.3 Answering the Research Hypotheses ............................................................... 179
5.3 Other Considerations and Discussion ................................................................. 181
5.3.1 Amount of the Tax and the Administrative Procedures Involved ................... 181
5.3.2 Current Subsidy Structure................................................................................ 183
5.3.3 Cultural Attitudes and Sensitivities ................................................................. 185
5.3.4 Recycling Supply Chain Issues ....................................................................... 187
5.3.4 Public Goods .................................................................................................... 189
5.4 Realigning the Environmental Taxation Acceptance Model .............................. 190
5.5 Conclusions from the Interviews and Focus Groups Sessions ........................... 197
5.6 Implications from the Interviews and Focus Groups Sessions ........................... 200
CHAPTER 6: QUANTITATIVE RESEARCH ....................................................... 203
6.1 The Questionnaire ............................................................................................... 203
6.2 Respondents ........................................................................................................ 205
6.3 Results................................................................................................................. 208
6.3.1 Descriptive Statistics ....................................................................................... 208
6.3.2 Model Analysis ................................................................................................ 216
6.4 The Findings: The Overall Model ...................................................................... 217
6.4.1 Findings: Attributes of the Independent Variables .......................................... 221
6.4.2 Cross-tabulation Analysis ................................................................................ 225
6.4.2.1 Gender ........................................................................................................... 225
6.4.2.2 Age ................................................................................................................ 226
6.4.2.3 Nationality .................................................................................................... 227
6.4.2.4 Tax Residency .............................................................................................. 228
6.4.2.5 Marital Status ................................................................................................ 229
6.4.2.6 Education ...................................................................................................... 230
6.4.2.7 Employment .................................................................................................. 232
6.4.2.8 Race .............................................................................................................. 233
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6.4.2.9 State .............................................................................................................. 234
6.5 Findings: Answering the Research Questions Using Regression Analysis ........ 235
6.6 Comparison of Means between Groups .............................................................. 249
6.6.1 Gender .............................................................................................................. 250
6.6.2 Age ................................................................................................................... 252
6.6.3 Education Level ............................................................................................... 254
6.6.4 Sources of income ............................................................................................ 256
6.6.5 Marital Status ................................................................................................... 259
6.7.6 Domicile Status ................................................................................................ 262
6.7.7 Political Affiliation .......................................................................................... 263
6.7.8 Race ................................................................................................................. 265
6.8 Summary ............................................................................................................. 270
6.8.1 Regression Analysis......................................................................................... 270
6.8.2 Attributes of the Independent Variables .......................................................... 271
6.8.3 Research Questions .......................................................................................... 272
6.8.4 Cross-tabulation Analysis ................................................................................ 273
6.8.5 Comparison of Means between Groups ........................................................... 273
CHAPTER 7: CONCLUSION .................................................................................. 275
7.1 Discussion of Major Findings ............................................................................. 275
7.1.1 Acceptance of Environmental Taxation among Various Sectors of Malaysian
Society ...................................................................................................................... 275
7.1.2 The Final Environmental Taxation Acceptance Model ................................... 281
7.1.3 Environmental Taxation Acceptance Model Variables ................................... 283
7.2 The Theory of Social Rental Costs ..................................................................... 297
7.3 Life of Pi Theorem .............................................................................................. 300
7.4 Implications ........................................................................................................ 303
7.4.1 Implications for Society ................................................................................... 303
7.4.2 Implications for Academia .............................................................................. 305
7.5 Recommendations ............................................................................................... 306
7.5 Contributions ...................................................................................................... 314
7.6 Implications for Future Research ........................................................................ 315
7.7 Limitations of the Study ..................................................................................... 317
7.8 Summary ............................................................................................................. 318
REFERENCES............................................................................................................ 321
APPENDICES ............................................................................................................. 335
Appendix 1: Guidelines during Focus groups and interview sessions ..................... 336
Appendix 2: Initial quantitative study ...................................................................... 339
Appendix 3: Final quantitative study Questionaire (English, Bahasa Malaysia and
Chinese editions) ...................................................................................................... 341

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