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The determinants of compliance with environmental tax: Behavioural study motivated by the case of Indonesia

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  • Iskandar, Deden Dinar
  • Bhaduri, Anik
  • Wunscher, Tobias

Abstract

Motivated by the case of Indonesia, this behavioural study applies theoretical and experimental approaches to observe the determinants of compliance with environmental tax. The study is expected to contribute to the environmental policy literature by examining the impact of financial reward and bribery in combination, beside other conventional enforcement factors such as tax rate, audits and fines. While theoretical analysis finds that compliance will decrease with tax rate and increase with audit, fine, financial reward and the price of a bribe, the results of the experiment indicate that the impact of each factor varies according to the presence of bribery. Despite the differences, both approaches show that bribery encourages evasion as the tax rate increases and curbs the positive impact of financial reward in enhancing compliance.

Suggested Citation

  • Iskandar, Deden Dinar & Bhaduri, Anik & Wunscher, Tobias, 2016. "The determinants of compliance with environmental tax: Behavioural study motivated by the case of Indonesia," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 11(1), pages 1-14, March.
    • Handle: RePEc:ags:afjare:233847
    DOI: 10.22004/ag.econ.233847
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    References listed on IDEAS

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    Cited by:

    1. Yoshihiro Hamaguchi, 2022. "Effect of environmental tax evasion on pollution havens within the EU’s dual regulation system," SN Business & Economics, Springer, vol. 2(12), pages 1-25, December.
    2. Voors, Maarten & Demont, Matty & Bulte, Erwin, 2016. "New Experiments in Agriculture," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 11(1), pages 1-7, March.

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