The Role of Indonesian Business Owners in Aggressive Tax Planning

Abstract

Objective: The objective of this study is to investigate the impact of firm characteristics, specifically leverage and profitability, on aggressive tax planning in public sector mining companies listed on the Indonesia Stock Exchange for the period of 2012-2016, with family ownership as a moderating variable. Theoretical Framework: This research draws upon established theories in finance and corporate governance to examine the relationship between firm characteristics and aggressive tax planning. Key theories include agency theory, which helps to understand the dynamics between owners and managers in decision-making processes, and the pecking order theory, which sheds light on how firms choose between internal and external financing options Method: The methodology adopted for this research comprises a quantitative approach utilizing data from 12 mining sector public companies over a five-year period, resulting in a sample size of 60. Data was processed using SPSS version 22.0 and Warp Pls 5.0. Leveraging both statistical analysis and structural equation modeling, the study explores the influence of leverage, profitability, and family ownership on aggressive tax planning. Results and Discussion: The findings indicate that leverage positively influences aggressive tax planning, while profitability exhibits a negative association. Furthermore, when moderated by family ownership, leverage demonstrates an amplified positive effect on aggressive tax planning, while profitability displays a strengthened negative impact. These results underscore the significant role of family ownership in shaping tax planning strategies within publicly listed companies. Research Implications: The practical implications of this research extend to corporate governance practices and tax planning strategies within the public sector mining industry. Understanding the interplay between firm characteristics and family ownership can inform policymakers and practitioners in enhancing transparency and accountability in tax-related decision-making processes. Originality/Value: This study contributes to the existing literature by examining the influence of firm characteristics on aggressive tax planning within the context of family ownership, particularly in the Indonesian market. By shedding light on the nuanced relationships between these variables, this research provides valuable insights for scholars, practitioners, and policymakers aiming to mitigate tax-related risks and promote responsible corporate behavior.