Improving Mining Company Performance by Providing Tax Incentives

Available online at www.rajournals.in International Journal of Management and Economics Invention ISSN: 2395-7220 DOI: 10.47191/ijmei/v11i10.05 Volume: 11 Issue: 10 October 2025 International Open Access Impact Factor: 8.518 (SJIF) Page no. 4734-4741 4734 Didit Suryoadi1, IJMEI Volume 11 Issue 10 October 2025 Improving Mining Company Performance by Providing Tax Incentives Didit Suryoadi1, Grahita Chandrarin2, Maxion Sumtaxy3 1,2,3 University of Merdeka Malang ARTICLE INFO ABSTRACT Published Online: 14 October 2025 Corresponding Author: Didit Suryoadi The performance of mining companies today is not only measured financially, but also by their ability to adapt to the global energy transition. RE has become a crucial solution for countries to reduce dependence on fossil fuels while minimizing environmental impacts. This study examines the impact of tax incentives on company performance in the Indonesian mining sector. Using data from 37 mining companies listed on the Indonesia Stock Exchange (IDX) for the period 2014–2023, this study found that tax incentives have a significant positive effect on company performance, as measured by Return on Assets (ROA). These results support the Stakeholder and Resource-Based View theories, which emphasize the importance of tax incentives in increasing operational efficiency and company value. The implications of this study are beneficial for company management in making investment decisions and the government in designing effective tax incentive policies. KEYWORDS: Tax Incentives, Company Performance, Mining. INTRODUCTION The mining industry, particularly coal mining, plays a crucial role in the Indonesian economy; however, various external and internal factors significantly influence its performance. Fluctuations in commodity prices, such as the decline in coal prices in 2020, significantly impacted company performance, reflected in the decline in net profit, ROA, and ROE for several major issuers, such as Adaro Energy and Harum Energy. This phenomenon is inextricably linked to the global paradigm shift toward clean energy, where renewable energy (RE) is becoming an increasingly primary focus, driven by technological advancements and growing awareness of the negative impacts of fossil fuels. The performance of mining companies today is measured not only financially but also by their ability to adapt to the global energy transition. RE has become a crucial solution for countries to reduce their dependence on fossil fuels while minimizing environmental impact. Mining companies that can diversify into renewable energy and implement sustainable business practices demonstrate greater resilience, as seen in the case of Harum Energy, which successfully improved its performance through expansion into the nickel industry. A key challenge for mining company performance is striking a balance between short-term profitability and long-term energy transition strategies. Government policies, such as carbon taxes and incentives for renewable energy, are increasingly impacting companies' operational and financial performance. A study by Qadir et al. (2021) shows that companies that integrate environmental aspects into their core business tend to have greater financial stability. Therefore, future mining company performance measurement must consider multiple dimensions, including operational efficiency, adaptation to green regulations, and contribution to a sustainable energy transition. Energy is a basic human need that supports economic growth and quality of life. With technological advancements and increasing awareness of the negative impacts of fossil fuels, renewable energy (RE) has become an increasingly important topic in a global context. RE not only enables countries to reduce their dependence on finite fossil fuels but also mitigates their negative environmental impact. Beyond its environmental impact, the energy industry also has a significant impact on a country's economy. As a primary economic sector, the energy industry is closely linked to the large companies operating within it. To develop and maintain expensive renewable energy infrastructure, these companies require significant investments. Therefore, investment in renewable energy has become a key issue in embracing a more sustainable energy transition. At the moment, Many countries have introduced incentives and policies supporting investment in RE, including various types of tax incentives. These incentives aim to encourage companies to invest in RE, which in turn is expected to increase profitability. Taxes are one of the government's instruments that can influence “Improving Mining Company Performance by Providing Tax Incentives” 4735 Didit Suryoadi1, IJMEI Volume 11 Issue 10 October 2025 corporate investment decisions. High taxes can reduce a company's net profit, while tax incentives can provide a strong incentive to invest in RE. Therefore, it is important to understand the interplay between taxes, corporate profitability, and RE investment. Amid escalating challenges related to climate change and limited conventional energy resources, the close interplay between renewable energy and tax harmonization plays a crucial role in driving the transition to a sustainable and environmentally friendly future. From this perspective, wisely formulated tax policies by the government can be a key driver for the development of the renewable energy industry, providing the necessary incentives to accelerate the deployment of renewable energy. Various countries have chosen tax breaks to stimulate investment in renewable energy projects. Tax breaks, such as income tax exemptions, import duty exemptions, or property tax cuts, not only provide financial incentives for companies and individuals committed to renewable technologies but also create a supportive environment for the growth of the renewable energy sector as a whole. Based on the problems previously explained, this study aims to analyze the influence of tax incentives on company performance. This research is expected to provide important benefits in several aspects. The theoretical benefits of this research are as follows: This research will provide a better understanding of how tax incentives, CSR, and investment in companies affect company performance, especially in the context of the rapidly growing mining industry. This research can provide policymakers with insight into the effectiveness of tax incentives in encouraging investment and their impact on the economy and the environment. Practical benefits: This research provides benefits for investors and company management. For investors, the findings of this research can serve as a reference in evaluating company performance, especially regarding the impact of tax incentive policies and CSR on profitability and business sustainability. The influence of tax incentives, social responsibility, and financial performance enables investors to make more intelligent and lower-risk investment decisions. Additionally, this research promotes corporate transparency, enabling investors to be more confident in investing in the mining sector. LITERATURE REVIEW The concept of corporate tax incentives encompasses several key dimensions (Graham et al., 2005). This study takes a twodimensional approach. The first dimension considers corporate taxpayers, focusing on evaluating how these tax incentives affect a company's income when conducting production activities. The second dimension, on the other hand, considers corporate taxes solely in terms of their impact on the company's financing. The first and second dimensions of corporate tax incentives work in tandem to influence corporate preferences for financing decisions centered on the company's sustainable performance (Graham et al., 2005). Regardless of the capital option chosen by a company, it is essential to note that the company will incur costs, such as dividends if it finances its business activities from its own resources, or interest if it chooses to finance the business through loans (Wulandari, Rachman, and Srimega 2022). In light of this conundrum, management decisions regarding capital options will need to consider the issue of tax incentives (corporate tax planning) and their impact on the company's sustainable financial performance. According to Albertazzi & Gambacorta (2007), corporate tax is a tax imposed on income earned by a company during a specific tax period while conducting business. Corporate tax is generally applied to companies that generate income after deducting expenses from sales. Albertazzi & Gambacorta (2007) argue that tax incentives and benefits, such as limited liability for legal entities, which add value to the company, also form the basis for corporate tax. Companies are taxed because, in many cases, they earn pure economic profits, profits that exceed the return on invested capital. Many authors have defined corporate tax in various ways. However, this study attempts to examine the definition made by Renn & Walker (2008), who define corporate tax as a mandatory transfer or payment made by individuals, institutions, or non-public groups to the government, asserting that corporate tax is a company activity other than tax payments, which is related to utilizing tax incentives for financing decisions. In addition, Olaniun et al. (2022) stated that the Nigerian National Tax Policy considers taxation as a fundamental process of tax collection in Nigeria, as well as a deliberate effort to instill a strong and efficient tax system in the country. This study will be adjusted to the assumptions of this definition and the conceptualization of corporate tax, which is discussed by matching the definition of corporate tax payments and tax incentives that give rise to the tax network. In accounting theory, there is no doubt about the importance of tax adjustments in developing tax plans, which aim to improve the impact of income tax payable on a company's financial performance. As noted in Crystallography (2016), the concept and content of tax adjustments have a certain history, development, and experience in Nigeria; however, it cannot be said that, in its practical application, it is a straightforward and seamless part of a company's financial statements and current plans. Crystallography (2016) states that although tax adjustments through deferred tax calculations first appeared in Nigerian corporate accounting reports in the early 1990s, they gained more widespread recognition among the accounting public when Nigeria adopted financial reporting standards promulgated by the International Accounting Standards Board (IASB). Since then, all accounting entities required to prepare financial statements in accordance with International Financial Reporting Standards (IFRS) must also make appropriate adjustments to tax liabilities to account for tax “Improving Mining Company Performance by Providing Tax Incentives” 4736 Didit Suryoadi1, IJMEI Volume 11 Issue 10 October 2025 exemptions, deductions, and various tax incentives. This marked the beginning of the accounting methodology for tax nets in Nigeria, as tax accounting practices eliminated the distortion of accounting profit or loss due to the impact of different tax conditions on accounting additions, including various tax exemptions, to the company's tax expense. Ohrn (2018) defines tax incentives as policies aimed at reducing a company's tax burden in order to encourage increased investment and adjustments to its financial policies. This incentive is realized in the form of the Domestic Production Activities Deduction (DPAD), which allows companies to deduct a portion of their domestic production income from their taxable income. This incentive reduces the company's effective tax rate, thereby increasing cash flow and facilitating investment financing. Liew Mei Yoke (2018) views tax incentives as policies that can reduce the tax burden on companies, particularly in the manufacturing sector, thereby increasing competitiveness and production efficiency. These incentives include tax reductions or eliminations at certain stages of production, such as tax refunds on inputs used to produce export goods, which allow companies to reclaim taxes already paid on raw materials. METHOD 3.1 Research Design Used This research is a quantitative, descriptive study that utilizes secondary data. The research subjects are mining companies listed on the Indonesia Stock Exchange (IDX). Secondary data was obtained from the Indonesia Stock Exchange (IDX), focusing on mining companies as the population. 3.2 Population and sample The sampling technique employed was a purposive sampling method, which involved selecting samples from the population based on the study's specific conditions. The research population consisted of companies listed on the IDX, totaling 63 mining companies. The research sample consisted of mining companies listed on the IDX, totaling 37 companies, with an observation period from 2014 to 2023 (a 10-year observation period). Therefore, the sample data for this study comprised 370 observations. The sampling technique, determined by the researcher, required that the company's financial report data be complete during the 10year observation period (2014-2023). 3.3 Data Analysis Techniques This study will employ correlation analysis to determine the direct influence of independent variables on dependent variables (Chandrarin, 2021). RESULTS AND DISCUSSION 4.1 Result This section details the analysis stages conducted through the research testing. The discussion begins with a description of the research object, namely, mining companies in Indonesia that remained registered throughout the research period. Next, the chapter outlines the descriptive statistical analysis of the variables used in the study. Finally, the section explains and discusses the test results. Descriptive Analysis: The Indonesian mining industry plays a significant role in the national economy, contributing to state revenue and creating jobs. Companies operating in this sector are not only focused on exploiting natural resources but also face increasingly complex regulatory, environmental, and social challenges. Based on data from the Indonesia Stock Exchange (IDX), several mining companies were listed and actively operating during the study period (Appendix 1). The companies targeted in this study were mining companies that were still listed and actively operating during the study period. The research data comprises 63 mining companies from 10 years of financial reports listed on the Indonesia Stock Exchange. The sample size covers the observation period from 2014 to 2023. Only data that meets the criteria of complete financial reports and a December 31st accounting period can be used in data processing. The data obtained are complete and meet the sample criteria, including 37 mining companies (Appendix 2). In the mining industry, various policies and regulations have been implemented to improve corporate governance. One aspect of primary concern is tax incentives. The government provides tax incentives to companies to encourage investment and industrial growth, including in the mining sector. These incentives can take the form of tax holidays, tax allowances, or other tax exemptions designed to enhance the competitiveness of the mining industry in Indonesia. Companies that effectively manage tax incentive policies tend to have more efficient financial structures and greater resilience to fluctuations in global commodity prices. Mining industry investment is also a crucial factor influencing company performance. Investments can include technology development, exploration of new resources, and infrastructure improvements to support company operations. Sound investments will increase production efficiency and reduce operational costs in the long term. However, investment decisions in the mining sector must be made cautiously, given the high volatility of commodity prices and the associated political and environmental risks. “Improving Mining Company Performance by Providing Tax Incentives” 4737 Didit Suryoadi1, IJMEI Volume 11 Issue 10 October 2025 Table 1. Descriptive Statistics Summary Variables Minimum Maximum Mean Standard Deviation SIZE 4,0431 11,9937 8,433 1.8578 Tax 0.7657 10,1136 5,4995 2.7565 Inv -23,6518 92.56 2,0563 12,2584 ROA -60.12 76.27 10,5447 18,3405 GRI 0.0199 0.998 0.4808 0.2962 Leverage 0.0009 10,1714 1,6919 2,2294 Based on descriptive statistical analysis of 370 valid observation samples, this study shows that the heterogeneity of this data provides a strong basis for further analysis, as it reflects the complex and diverse market reality. Company Size (SIZE): This variable has a minimum value of 4.0431 and a maximum of 11.9937. With an average (mean) of 8.4330 and a standard deviation of 1.8578, the data shows a fairly wide distribution. Tax Incentives (Tax), This variable data shows a more significant variation, with a minimum value of 0.7657 and a maximum of 10.1136. The average of 4.4995, combined with a relatively large standard deviation of 2.7565, indicates substantial differences in the tax burden borne by companies. This could be caused by differences in tax strategies, industries, or fiscal incentives received by different companies. The investment variable has a very extreme range, from a negative value of -23.6518 to a positive value of 92.5600. With a mean of 2.0563, but a substantial standard deviation (12.2584), some companies may be in a stage of aggressive expansion, while others may be divesting or facing challenges that limit investment. The Performance (ROA) variable also shows a vast spread, ranging from -60.12 to 76.27. Although the mean is positive (10.5447), the very high standard deviation (18.3405) confirms the existence of significant variations in profitability levels. This reflects that the study sample includes very unprofitable companies (possibly experiencing significant losses), companies with moderate profitability, and very profitable companies. The CSR variable, as measured by the GRI index, which assesses the level of sustainability reporting, has a minimum value of 0.0199 and a maximum value of 0.9980. With a mean of 0.4808 and a standard deviation of 0.2962, these data indicate that the level of corporate sustainability reporting tends to vary, with some companies having very low reporting levels and others approaching the maximum value. The Leverage variable shows significant variations in capital structure. The minimum value of 0.0004 indicates companies that use almost no debt, while the maximum value of 10.1714 indicates companies that rely heavily on debt. The mean of 1.6919 with a standard deviation of 2.2294 confirms the existence of considerable diversity in corporate financing decisions. Table 2. Q-Square Coefficient Variables Q-Square Coefficient Invest 0.024 ROA 0.112 The results show that the effect of tax incentives on ROA has a coefficient of 0.295 with a p-value of 0.001, which indicates that this effect is significant at the 95% confidence level. Thus, the hypothesis is accepted, indicating that tax incentives have a positive and significant impact on financial performance. Table 3. Direct Effect Test Results Path Coefficient P Value Conclusion Tax → ROA 0.295 0.001*** accepted This research supports the findings that tax incentives and Corporate Social Responsibility (CSR) act as variables influencing company performance through investment. Other findings indicate that investment serves as a mediating variable in the relationship between tax incentives and CSR on company performance. The results of this research will be analyzed and explained further in the following subsections, based on the empirical model testing and hypotheses. 4.2 Discussion Stakeholder Theory (Freeman, 1984; Pearce et al., 1987). The influence of tax incentives on company performance, in this case, is proxied by Return on Assets (ROA), which represents “Improving Mining Company Performance by Providing Tax Incentives” 4738 Didit Suryoadi1, IJMEI Volume 11 Issue 10 October 2025 how the company balances the interests of various stakeholders, including the government, investors, the community, and employees. In the context of mining companies in Indonesia, government-provided tax incentives aim to support investment, create jobs, and increase the mining sector's contribution to the national economy. Based on Stakeholder Theory, companies that utilize tax incentives well not only benefit from reduced tax burdens but are also able to improve relationships with broader stakeholders. Thus, tax incentives can enhance a company's ability to allocate resources for the benefit of key stakeholders, ultimately improving company performance. Investors and shareholders view tax reductions as a way to increase a company's net profit, which is reflected in improved performance. When companies manage their tax burden effectively, this can result in higher returns for shareholders. Tax incentives serve as a tool for companies to increase investor confidence and appeal. This aligns with stakeholders' view that companies are accountable not only to the government as taxpayers but also to investors who expect optimal profitability. The results of this study, when viewed from a tax incentive perspective, enable companies to allocate more funds to enhance workforce welfare, including wage increases, training, and workplace safety. In the high-risk mining industry, investment in occupational health and safety is crucial to maintaining workforce productivity. Stakeholder theory emphasizes that employee satisfaction and well-being will positively impact a company's operational performance, ultimately increasing asset efficiency and impacting ROA. The community and environmental perspectives of this research, according to stakeholder theory, see that mining companies receiving tax incentives are expected to increase their social and environmental responsibilities. Stakeholder theory emphasizes that business sustainability depends not only on financial profits, but also on how companies maintain balance with the environment and surrounding communities. With tax incentives, companies have the opportunity to enhance their corporate social responsibility (CSR) programs, including infrastructure development in mining areas, effective environmental impact management, and local community economic empowerment. These positive impacts indirectly increase company legitimacy, reduce conflict with the community, and create more stable business conditions, which ultimately contribute to profitability and increased ROA. From the government's perspective as a regulator, tax incentives are provided as a policy to encourage investment in the mining sector, which makes a significant contribution to the national economy. As a key stakeholder, the government has a vested interest in creating a conducive investment climate for mining companies. By providing tax incentives, the government aims to encourage companies to increase production, create jobs, and contribute more to economic growth. Properly utilized tax incentives will lead to increased operational efficiency, reflected in improved financial performance, including a higher return on assets (ROA). The findings of this study align with those of previous studies, which demonstrate that tax incentives not only contribute to reducing the tax burden but also enhance corporate performance by optimizing stakeholder relationships (Oladipo et al., 2019). By effectively utilizing tax incentives, companies can increase stakeholder satisfaction, maintain business sustainability, and optimize profitability by increasing asset efficiency. Stakeholder theory views tax incentives not only as a fiscal instrument that directly increases corporate profitability but also as a mechanism that enables companies to balance the interests of various stakeholders. Through effective management in allocating tax incentive benefits, mining companies in Indonesia can increase legitimacy, strengthen relationships with key stakeholders, and ultimately improve financial performance, reflected in increased ROA. The findings in this study are empirically supported by the results of a study (Taiwo & Oyedokun, 2022), which consistently demonstrate a positive effect of tax incentives on corporate performance. The analysis reveals that the benefits of tax incentives are manifested through several key transmission channels, particularly increased corporate liquidity, which enables more efficient allocation of capital to various productive activities. The consistency of these findings is evident in both the temporal dimension, spanning the period before and during the pandemic, and the geographic dimension, across various tax jurisdictions, demonstrating the resilience of the relationship to varying macroeconomic conditions and regulatory frameworks. Furthermore, the convergence of these research findings strengthens the theoretical proposition that tax incentives serve as an effective fiscal policy instrument, providing a strong empirical basis for policymakers to design more targeted incentive packages and for corporate management to optimize the resulting fiscal benefits. These complementary findings also create opportunities for further research on moderating factors that can enhance or diminish the effectiveness of tax incentives in various institutional contexts. CONCLUSION This study directly examines the effect of tax incentives on company performance. The study was conducted on the Indonesian Stock Exchange. Based on the analysis, this study reveals several key findings regarding the impact of tax incentives on company performance, as measured by Return on Assets, both directly and indirectly through investment. Significant findings suggest that tax incentives have a positive and statistically significant impact on company performance. “Improving Mining Company Performance by Providing Tax Incentives” 4739 Didit Suryoadi1, IJMEI Volume 11 Issue 10 October 2025 The findings of this study make a significant contribution to the development of management theory and practice by confirming the important role of tax incentives in enhancing firm performance through investment mechanisms. Based on a comprehensive analysis of mining companies in Indonesia, this study confirms that tax incentives have a significant influence on firm performance. Directly. REFERENCES 1. Ahmad, Nisar, Faisal Nadeem Shah, Faisal Ijaz, and Muhammad Naeem Ghouri. 2023. “Corporate Income Tax, Asset Turnover and Tobin’s Q as Firm Performance in Pakistan: Moderating Role of Liquidity Ratio.” Cogent Business and Management 10(1). doi: 10.1080/23311975.2023.2167287. 2. 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