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Abstract
This study is intended to provide the clue regarding the determinants of compliance
with environmental tax under imperfect monitoring and the presence of bribery,
motivated by the case of Indonesia. The study is expected to contribute on
environmental policy and tax compliance literatures, particularly by examining the
impact of financial reward under the presence of bribery, aside of others
conventional compliance instruments such as tax rate, audit, and sanction. In
addition to financial reward, this study also incorporates the bribe explicitly as a
determinant of compliance. The study employs theoretical and experimental
approaches. While theoretical analysis find that the compliance will decrease with
tax rate and increase with audit, sanction, financial reward, and the bribe rate; the
experiment findings indicate that the impact of each determinant are vary according
to the existence of bribery. Despite the difference, both approaches show that the
bribery indeed hampers the compliance on environmental tax. The bribery
encourages the polluting firms to aggressively evade the environmental tax as the
tax rate increase and curbs the positive impact of financial reward in enhancing the
compliance.