ADAPTIVE INNOVATION AND TAX SERVICE PERFORMANCE: A COMPARATIVE STUDY OF REGIONAL REVENUE AGENCIES DURING PANDEMIC CRISIS

Abstract

Tax revenues of the Special Region of Yogyakarta and Central Java Provincial Governments declined during the COVID-19 pandemic in 2020. Amid this crisis, tax service innovation initiatives emerged as a critical response. This study aims to explain the relationship between the COVID-19 pandemic, tax performance, and service innovation implementation during 2020–2024 in two Indonesian provinces with distinct governance characteristics. Using adaptive governance theory and qualitative analysis through a comparative case study approach, we conducted semi-structured interviews with key stakeholders. The findings reveal that tax service innovations significantly influenced regional tax revenue performance during the pandemic through three key characteristics: (1) flexible cross-organizational service cooperation schemes, (2) implementation of equitable cost-benefit distribution principles, and (3) innovation execution based on competitive incentive schemes. Central Java’s more comprehensive digital transformation and broader partnership strategy performed better than Yogyakarta’s hybrid approach. This study contributes to adaptive governance literature by demonstrating how flexible arrangements in public service innovation can enhance organizational resilience during crises.

Keywords: policy innovation, adaptive governance, tax administration, local government, pandemic.