Abstract
<p>This article described the Indonesian market reaction on the announcement of tax amnesty related information in the financial statements. Statement of Financial Accounting Standards (SFAS) No. 70 required companies to recognized and measured the tax amnesty's assets. Tax amnesty's asset was selected as information to be analyzed. The total of 141 observations from the year 2016 – 2017 financial statements were selected as a sample. To measure market reaction, three proxies were used: value relevance, cumulative abnormal return, and trading volume activity. Data analyzed using linear regressions. This article showed that the market reacted to tax amnesty information, although the level of reaction was low. This article also showed that in general, market reaction toward tax amnesty was positive. These results also implied that the SFAS 70's accounting requirement improved the quality of financial statements. </p>
Highlights
This article provides insight into Indonesian tax amnesty programme (TA) that occurred for 9 months, from July 2016 – March 2017
If we looked at another perspective, tax amnesty's assets resulted from the income that never been reported previously, so in the perspectives of the accounting framework, the recognition should be treated as error correction
The high spread might be caused by several factors: (1) Some firms might try to reduce the redemption fee paid to tax office by decreasing the TA Asset; (2) Some firms might select some of the TA asset to be revalued in accordance with the accounting fair value, resulting in the reduction of TA asset, since the Statement of Financial Accounting Standards (SFAS) 70 required the company that revalued the TA asset to combine the value to its respective asset account
Summary
This article provides insight into Indonesian tax amnesty programme (TA) that occurred for 9 months, from July 2016 – March 2017. TA was believed to increase investor's trust toward the company, and like the results, the company's would likely receive more funds and capital, if it's participating in a TA (Torgler, 2002; Mehmet, 2015). Indonesia Stock Exchange's reported that tax amnesty program had positive impacts on the stock market, as reflected by an increase in the 2016 stock exchange's capitalization by 18.35 percent from its position in late 2015. The trade frequency hit a new record on July 13, 2016, at 377,000 times.The success level of the program can be contributed by the regulations, in which the regulations asked the taxpayer to disclose the tax amnesty information clearly and precisely (Pommerehne and Zweifel, 1991; Torgler and Schalteggler, 2005)
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