Navigating Tax Allowance: Energy Entity Compliance in Indonesia

To support the achievement of zero emissions by 2060, the Indonesian government issued a policy for companies, including a tax allowance for energy companies to support the green economy in Indonesia. This study investigates the level of tax compliance of energy companies in Indonesia, the utilization of tax allowances by energy companies, and investor reactions to energy companies. Using quantitative and qualitative approaches from data of energy companies on the Indonesia stock exchange between 2017 to 2023, the results of this study show that the level of tax compliance of energy companies is low, except for that of renewable energy companies. While the utilization of tax allowances by energy companies is minimal. On the other hand, investors’ assessment of the financial performance of energy companies is positive but the opposite reaction is found on the tax compliance of energy companies. Tax allowance utilization requirements and investment administration process are some of the reasons. This result encourages the government to issue more attractive green economy policies to be implemented by companies, not only in the form of tax allowances but also ease in the investment process. This research provides new insights in understanding the relationship between regulators and practitioners in supporting the implementation of the green economy, especially in tax policy.