Political Connection, Ownership Structures and Tax Aggressiveness: The Case of Indonesia

Agita Zafi Rahmasari,Agung Nur Probohudono,Doddy Setiawan

doi:10.47312/aar.v5i01.315

Abstract

The main purpose of this research is to examine the influences of political connection and ownership structures towards the tax aggressiveness in Indonesian companies. This research is a quantitative research and the samples consist of the companies listed in the Indonesia Stock Exchange in 2015-2016. Furthermore, the data used in this research is secondary data obtained from the companies’ financial reports and annual reports. The tax aggressiveness is measured with Book Tax Differences (BTD) proxy. The result of this research shows that political connection, government ownership, and foreign ownership give negative significant effects towards tax aggressiveness, while institutional ownership give no significant effect towards tax aggressiveness. The limitation of this research is the using of 2-year samples only that consist of companies in various sectors. In addition, the companies that are classified in a particular sector, are given different tax treatment by Directorate General of Taxes. This research can be beneficial for making taxation regulation in the future. This research is also expected to be the supporting literature for the next research for the scholars in the taxation and accounting field related to the company’ tax aggressiveness. This research extends the previous research by adding some type of ownership structure in analyzing factors that affect tax aggressiveness in Indonesia. The ownership structure consists of government ownership, foreign ownership, and institutional ownership. Furthermore, political connections in this study were analyzed from connections through boards of directors and commissioners.

Highlights

Tax has very important role in Indonesia because it is one of the biggest income for the country
Based on the above explanation, this study aims to examine the relation between political connections and ownership structures that consist government ownership, foreign ownership, and institutional ownership toward tax aggressiveness in Indonesia
Based on the result of the research, political connection negatively affecyed tax aggressiveness. It shows that H1 which states that political connection positively affects tax aggressiveness is rejected

Summary

Introduction

Tax has very important role in Indonesia because it is one of the biggest income for the country. Every citizen is required to pay taxes to support the government in the development of public infrastructure and facilities (Gompers & Metrick, 2001). As what have been mentioned on the www.kemenkeu.go.id, the government expected that by 2017 the tax could contribute to the state's wealth with 85.6% contribution or Rp. 1498.9 trillion in accordance with State Budget 2017. The target decreases from State Budget 2016, which budgeted tax revenue with Rp. 1546.7 trillion. Based on the performance report data published by the Directorate General of Taxation, the percentage of tax revenue realization had decreased continuously from 2013 to 2016. It can be said that there are still many taxpayers both private and business entities that have not maximally fulfilled the tax demands that should be paid to the state

Objectives

Methods

Findings

Conclusion