Abstract
This study investigates the association between the CEO’s foreign experience and the CEO’s share ownership with tax aggressiveness. The research data is sourced from financial reports and annual reports of non-financial sector companies listed on the Indonesia Stock Exchange (IDX) from 2016 to 2019, obtained from www.idx.co.id. Based on purposive sampling, the total sample in this study amounted to 88 observations. Hypotheses testing in this study employed multiple regression analysis for cross-section data. This study concludes that the CEO’s foreign experience is negatively associated with tax aggressiveness, and CEO’s ownership is not associated with tax aggressiveness. Returnee CEO can adequately analyze the costs and benefits related to tax aggressiveness, and it is found that if they carry out tax aggressiveness in Indonesia, the costs incurred will be greater than the benefits received. Meanwhile, the CEO’s ownership in Indonesia is still low, so it cannot affect the tax aggressiveness level. This research indicates that the Indonesia Tax Authority need to pay attention to the CEO’s experience when conducting audits and need to cooperate with the Indonesia Financial Services Authority (OJK) to measure how the company behaves in running its business, whether the returnee CEO carry out all business ethics only or adequately those related to tax aggressiveness.
Highlights
Taxes are the largest source of income for the state employed to finance state expenditures (Ayem & Setyadi, 2019)
In addition to increasing debt, companies can carry out tax aggressiveness by taking advantage of Indonesia Income Tax Regulations concerning non-tax objects by generating non-taxable income; for example, a company can invest in companies in Indonesia with ownership of at least 25%, so that dividends received by the company will be categorized as income that is excluded from the tax object (Luke & Zulaikha, 2016)
The returnee Chief Executive Officer (CEO) is more competent in observing costs and benefits related to tax aggressiveness, one of which is reputation costs
Summary
Taxes are the largest source of income for the state employed to finance state expenditures (Ayem & Setyadi, 2019). The company’s strategy to reduce taxes is tax aggressiveness (Luke & Zulaikha, 2016) This strategy is usually carried out by taking advantage of loopholes in tax regulations, commonly known as the gray area (Charisma & Dwimulyani, 2019). Companies commonly employ tax planning to increase debt because the debt they have will cause interest expenses, and this interest expense can reduce company profits so that tax payable will decrease (Nugraheni & Murtin, 2019). In addition to increasing debt, companies can carry out tax aggressiveness by taking advantage of Indonesia Income Tax Regulations concerning non-tax objects by generating non-taxable income; for example, a company can invest in companies in Indonesia with ownership of at least 25%, so that dividends received by the company will be categorized as income that is excluded from the tax object (Luke & Zulaikha, 2016). The Indonesia Tax Authority cooperates with the OECD member countries to cope with similar problems in tax administration, such as international tax avoidance and tax aggressiveness
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