Fiscal Capacity and Regulatory Enforcement Action on Haze Pollution

: Empirical Evidence from Indonesia

Abstract

Haze pollution in Indonesia is a harmful environmental crisis in the southeast Asian region. This paper investigates the impact of fiscal capacity in the context of a mixed instrument on haze pollution. By considering fiscal capacity, this paper provides an empirical analysis whereby regulatory tax enforcement may coexist and may complement the environmental regulatory action. This paper shows that tax policy produces a significant deterrence impact, reducing hotspot development by 1.47%. Furthermore, this paper demonstrates that the transition policy to a green tax revenue system is useful for addressing haze pollution.