Book-tax Differences Research Articles

The Effect of Book-Tax Difference and Profit Management on Profit Growth in Manufacturing Companies Listed on the Indonesia Stock Exchange

Industrial development in Indonesia makes every existing company compete to advance the company. Every company has a main goal, namely to obtain and increase company profits every year. This research design uses a quantitative descriptive approach, aiming to determine the relationship between two or more variables (Winarno 2013: 67). This research discusses the Effect of Book-Tax Difference and Earnings Management on Profit Growth in Manufacturing Companies Listed on the Indonesia Stock Exchange. Based on the results of hypothesis testing for the Book-Tax Difference (X1) variable, it is known that the tcount is 2.802718 with a significance level of 0.0255. This shows that tcount is greater than ttable (2.802718 > 1.671) with a significance value (0.0255 <0.05). So it can be concluded that the Book-Tax Difference (X1) has a significant positive effect on Profit Growth (Y).

Book-Tax Differences and Profit Growth: Evidence from Indonesia

This study aims to examine the effect of permanent and temporary differences as well as book-tax differences on profit growth in property and real estate firms listed on the Indonesia Stock Exchange (IDX). Permanent differences refer to the differences between taxable income and accounting income that cannot be reversed in the future, while temporary differences are the differences that will reverse over time. The study focused on the sub-sector of property and real estate, which was selected because these companies are considered high-risk and often adopt strategies to legally minimize their tax burden in order to maximize profits.. Purposive sampling was used to select a sample of 12 property and real estate firms that consistently published audited financial statements in Indonesian Rupiah from 2018 to 2021 and did not undergo delisting from the IDX during that period. The results of the analysis reveal that profit growth is positively and significantly influenced by both permanent and temporary differences. However, there was no significant impact observed from book-tax differences. These findings may provide insights for policymakers and investors in the property and real estate sector.

Effect of Book Tax Difference, Foreign Ownership and Transfer Pricing on Tax Avoidance with Profit Management as Moderating Variables

Purpose — The main objective of this research is to test which is to find out the effect of the book-tax difference, on the other hand, foreign ownership and transfer pricing that is adjusted for tax avoidance, which focuses on the level of profit management which is positioned as an aspect of the moderating variable. Design/methodology/approach — This study focuses on secondary data in the form of samples from several companies engaged in manufacturing, which were listed on the Indonesia Stock Exchange from 2016 to 2019. The companies sampled in this study amounted to 31 companies for 4 years. which is used as a purposive sampling method. The form of data analysis used leads to the Partial Least Square (PLS) method, where it is necessary to use SmartPLS version 3. software. Findings — The study's results found that book-tax difference and transfer pricing influence avoiding taxes. However, the level of foreign ownership does not affect the level of tax avoidance. The research results regarding profit management variables could be moderated regarding the relationship between book-tax difference and transfer pricing on tax avoidance. Still, it cannot relate to the relationship between foreign ownership and tax avoidance practices. Paper type — Quantitative

Tax Audit Effectiveness: Detection of Tax Sheltering Through Implication Book Tax Differences on Earnings Management

The objectives of the study were to (1) analyze the effectiveness of tax audits by detecting earnings management and tax sheltering and those carried out by audited taxpayers, (2) to examine the effect of Book Tax Difference on earnings management, and (3) to examine the impact of earnings management on tax sheltering. This research uses a quantitative approach with philosophical considerations of positivism, belongs to applied research, and includes descriptive research. The research design used is correlational research, namely testing and estimating the relationship of many variables either partially or simultaneously by using the multiple regression method of panel data. This study uses panel data regression analysis with (1) Common Effects using an ordinary least square (OLS) approach, (2) Fixed Effects using a dummy variable technique, (3) Random Effect Model (REM) or Generalized Least Square techniques. The research data was obtained from the Financial Statements of Manufacturing Companies listed on the IDX (2017-2020). The results of this study indicate that Earning Management is influenced by Book Tax Difference, Tax Sheltering is influenced by Earning Management, and the effectiveness of tax audits can be achieved by detecting earnings management and tax sheltering and by audited taxpayers. The novelty of this research is that the understanding of earning management and tax sheltering practices by taxpayers can be supported by providing access for tax examiners to audited financial statements and financial audit information.

PENGARUH BOOK TAX DIFERRENCE YANG DIUKUR DENGAN FIXED ASSETS, SALES GROWTH DAN DEFERRED TAX EXPENSE TERHADAP TAX AVOIDANCE

The purpose of this study is to find out how Book Tax Difference as measured by the ratio of Fixed assets, Sales growth and Deffered tax expenses affects the possibility of Tax avoidance in Manufacturing companies listed on the Indonesia Stock Exchange for the period 2019 – 2021. The research method used is a descriptive research method and verification analysis.The population in this study consisted of manufacturing companies listed on the Indonesia Stock Exchange. Sampling in this study was carried out by purposive sampling technique. There are 14 manufacturing companies that meet the criteria to be used as research samples.The analytical method used is Multiple Linear Regression analysis. Based on the results of the study using analysis of the coefficient of determination, it shows that partially the variable that has the most influence on the Tax avoidance variable is the Sales Revenue variable (X2) of 15.4% and followed by the Deffered tax expense variable of (X3) of 15.1% and the Fixed variable Assets (X1) of 13.1%. Thus the overall effect is 43.6% while the remaining 56.4% is contributed by variables other than Fixed assets, Sales growth, and Deffered tax expenses. Based on the output results using SPSS 16.0, the coefficient of determination can be obtained, which is equal to 0.436. This means that simultaneously Fixed assets (X1), Sales growth (X2), and Deffered tax expenses of (X3) affect Tax avoidance (Y) of 43.6 % while the remaining 56.4% is influenced by other factors not examined in this study.

The Effect of the PCAOB’s Restrictions on Auditor-Provided Tax Services on Audit Quality, Earnings Quality, and Tax Avoidance

This study examines whether the PCAOB’s restrictions on auditor-provided tax services (APTS) in 2005 curtail the potential negative impact on companies’ audit quality, earnings quality, and tax avoidance activities. Using a difference-in-differences research design, this study focuses on firms that retained APTS after the SOX and then significantly reduced APTS purchases after the PCAOB’s restrictions. I find that the PCAOB’s restrictions on APTS are associated with fewer subsequent financial restatements and higher discretionary permanent book-tax differences. Further analysis shows that firms with more effective audit committees are less likely to meet or beat earnings targets and have smaller discretionary permanent book￾tax differences following the PCAOB’s restrictions. This finding supports the notion that audit committee effectiveness plays an important role in alleviating the negative impact of APTS on earnings quality and curtailing aggressive tax planning. The results should be of interest to the U.S. accounting and audit regulators such as the SEC and PCAOB, public accounting firms, auditors, and corporate audit committees.

Do Taxes Still Affect Earning Persistence?

While financial statements are the primary source of information about a firm, they tend to be under earnings management practices, namely to avoid paying tax. Therefore, we aim to examine whether taxes still affect earning persistence in an era of prevalent digital information. For that purpose, we use book–tax differences considering the deductible temporary differences and the taxable temporary differences. In addition, we analyze which of the two earnings components are more affected by taxes, specifically cash flow or accruals. We estimate econometric regressions using panel data to test our hypotheses. Through a sample of 421 small- and medium-sized (SME) Portuguese firms, between 2016 and 2020, we found empirical evidence that earning persistence tends to be lower when deductible temporary differences increase, while taxable temporary differences produce no statically significant effect. Furthermore, our results suggest that cash flow component increases more earning persistence than accruals. Therefore, deductible temporary difference may be an indicator of earnings management activities in these firms. These results are relevant, given the potential negative consequences of earnings management for the efficient decision making of stakeholders and even more because SMEs represent a substantial number of firms in European countries, particularly in Portugal.

The impact of the COVID-19 pandemic on corporate tax avoidance: evidence from S&P 500 firms

PurposeThis study aims to examine the impact of the COVID-19 pandemic on corporate tax avoidance (TA).Design/methodology/approachThis study used a panel data set of US publicly traded firms listed in the Standard & Poor 500 index. Based on available information in the DATASTREAM database covering the 2019–2021 period, three proxies for TA are used, namely the current effective tax rate (CUETR), the cash effective tax rate and book-tax differences (BTD). Multiple regression models including industry and year fixed effects are estimated. Additional analyses are performed using BTD components i.e. temporary and permanent BTD, and testing the impact of the COVID-19 pandemic across industries.FindingsThe results show that the outbreak of the novel coronavirus (COVID-19) affected positively the CUETRs and negatively BTD, indicating a reduction in TA, in the postpandemic period. Further analyses provide evidence that this effect is the same, regardless of the degree of industry failure probability, but it is more driven by the reduction of deferred tax expenses (temporary BTD component). These findings suggest that the US publicly listed firms have experienced a serious drop in their income in the postpandemic period, following the markets closure and the quarantine periods that hampered business. Therefore, with lower profits, they are not willing to evade taxes.Social implicationsThis paper enriches taxation research during economic crises. The research findings have important policy implications. On the one hand, the fiscal policy should stimulate growth to allow firms to tackle the challenges they confronted post-COVID-19. On the other hand, the global economic crisis caused by the pandemic has led to a major deterioration in public finances and has raised inequalities across households. Therefore, it would be necessary to review public fiscal policies to achieve a balance of equity, growth and sustainability. In this context, tax reform focusing on tax progressivity could counter in part the negative economic effects of the COVID-19 pandemic and led to economy recovery.Originality/valueThis study contributes to the growing body of literature on the COVID-19 effects with a special focus on corporate practices. This study provides first evidence on the effect of the COVID-19 pandemic on manager’s behavior from taxation perspective. This study also enriches taxation research during economic crises.

Tax avoidance and earnings management: a neural network approach for the largest European economies

In this study, we investigate the relationship between tax avoidance and earnings management in the largest five European Union economies by using artificial neural network regressions. This methodology allows us to deal with nonlinearities detected in the data, which is the principal contribution to the previous literature. We analyzed Compustat data for Germany, the United Kingdom, France, Italy, and Spain for the 2006–2015 period, focusing on discretionary accruals. We considered three tax avoidance measures, two based on the effective tax rate (ETR) and one on book-tax differences (BTD). Our results indicate the presence of nonlinear patterns and a positive, statistically significant relationship between discretionary accruals and both ETR indicators implying that when companies resort to earnings management, a larger taxable income—and thus higher ETR and lesser tax avoidance– would ensue. Hence, as also highlighted by the fact that discretionary accruals do not appear to affect BTD, our evidence does not suggest that companies are exploiting tax manipulation to reduce their tax payments; thus, the gap between accounting and taxation seems largely unaffected by earnings management.

Real Earnings Management Sine Qua Non Book-Tax Differences in Tax Avoidance of Mining Sector Companies in Indonesia

This study aims to prove the effect of book income that can be manipulated through real earnings management activities on book-tax differences that appear to be interrelated but have not been widely studied. Researchers want to prove the coupling relationship (sine qua non) between real earnings management and book-tax differences based on rational choice theory as the main theory. Tests were conducted on 43 sample companies in the mining sector listed on the Indonesia Stock Exchange in 2018–2021. The analytical method used is panel data regression with the help of EViews (Econometric Views) version 12. The results prove that there is an effect of abnormal cash flow and abnormal discretionary expenses on book-tax differences, while abnormal production costs have no effect. Furthermore, the same result is also obtained when the reverse test is conducted, namely book-tax differences in real earnings management. The reciprocal test gives the result that book-tax differences affect abnormal operating cash flows and abnormal discretionary expenses but do not affect abnormal production cots. Meanwhile, the alignment of the reciprocal relationship between abnormal cash flow operations and abnormal discretionary expenses to book-tax differences shows the relationship (sine qua non) between real earnings management and book-tax differences. The contribution of this research proves that book-tax differences are the output of real earnings management, so the amount can be used as an indicator if a company manipulates earnings. Therefore, it is important for the government, especially the Directorate General of Taxes as a policymaker to start considering the amount of book-tax differences in a certain range that is permitted for companies. In addition, it can be followed up by issuing additional tax regulations if needed to minimize tax avoidance.

ACCOUNTING CONSERVATISM AND CORPORATE TAX AVOIDANCE

This study investigates the effect of accounting conservatism on the corporate tax avoidance of listed non-financial firms in Nigeria. This study computes corporate tax avoidance based on the cash effective tax rate (CETR), GAAP effective tax rate (GETR) and book tax difference (BTD). Accounting conservatism was measured using negative accruals. The study employed an ex-post factor research design utilizing unbalanced panel data. The study covered 48 listed non-financial firms during the period between 2014 and 2020. Three regression models were developed and utilized in the study. The study has revealed that accounting conservatism has a negative and significant effect on both the GETR and BTD. It is recommended that the Financial Reporting Council of Nigeria should encourage promulgation of standards which improve conservatism in financial reporting, as it has been empirically proven to reduce tax avoidance practices by non-financial firms in Nigeria.

The impact of top management team heterogeneity on book-tax differences: An analysis using institutional perspective

The aim linked with the ongoing article is to examine the role of top management team heterogeneity along with audit committee characteristics on the book-tax difference of the Jordanian listed firms. The data has been extracted from the eighteen listed companies from 2009 to 2021 that are listed on the Amman Stock Exchange. To test the hypotheses, a fixed-effect model along with the robust standard error model has been executed. The results revealed positive linkage among the top management team heterogeneity, audit committee characteristics, and book-tax difference of the Jordanian listed firms. These findings are suitable for the regulators who want to develop new policies related to the book-tax difference and top management team heterogeneity along with the new researchers who want to investigate this area in the future.

Parcelamento tributário como determinante da agressividade fiscal em empresas brasileiras abertas

ABSTRACT The aim of this article was to study the impact of tax installment plans on the tax aggressiveness of Brazilian listed companies. Despite the relevance and timeliness of the topic, there are no studies that examine the use of special tax installment plans as a determinant of the tax aggressiveness of Brazilian listed companies. Tax installment plans have been used repeatedly by Brazilian companies and the number of adherents has grown significantly over time, where this resource can be understood by companies from the perspectives of tax regularization and tax savings. The research contributes to the scientific knowledge on the subject by providing evidence on the determinants of tax aggressiveness, and it is believed that the government can use the results to improve the offer of tax installment plans and the understanding of tax legislation, such as through the development of restrictions on access to installment plans, by allocating them to companies in real financial difficulties, as well as through improvements in its inspection process, considering that companies that pay taxes in installments are more tax aggressive. The data were obtained from explanatory notes, through the Ministry of the Economy’s access to information service, and from the Economatica® database. The Special Tax Regularization Program (PERT) 2017 was used as a reference for tax installment plans, and tax aggressiveness was measured using the effective tax rate (ETR), ETR Cash, and book tax difference (BTD). The period analyzed is from 2017 to 2020, and the statistical method applied was multiple linear regression for panel data with random effects. The results show that companies that choose to pay their taxes in installments tend to take a more aggressive tax position. The evidence contributes to extending the theory of the determinants of tax aggressiveness and can help the government in its inspections and in improving tax installment offers and tax benefits.

Efeitos da responsabilidade tributária de gestores na relação entre autuação e agressividade fiscal

ABSTRACT The aim of this research was to assess the moderating role of the joint and several liability of company directors in the relationship between the cumulative value of tax infraction notices and the subsequent level of corporate tax avoidance. Based on agency theory, the literature suggests that penalizing managers is more effective in reducing tax avoidance than penalizing the firm itself. However, this proposition had not been tested in Brazil, where the legislation determines that infraction notices and the consequent penalization of companies are carried out with the joint and several liability of the directors who have acted in excess of their powers or in violation of the law, the articles of incorporation, or the bylaws. The research is relevant because it presents empirical findings on the determinants of tax avoidance in large companies, as well as demonstrating the importance of the establishment of tax liability in controlling tax avoidance. This research has implications for the public debate on the establishment of tax liability, particularly its role in deterring tax avoidance. As a practical implication, it is suggested that the tax authority prioritizes tax audits that provide evidence that could lead to the tax liability of directors. The research consisted of a multiple linear regression analysis using the ordinary least squares (OLS) method on 23,142 observations from 4,560 large companies, covering the period from 2014 to 2020, collected directly from the internal systems of the Brazilian Federal Revenue Office (RFB). The results suggest that the joint and several liability of directors attenuates (intensifies) the positive relationship between the cumulative value of tax infraction notices and tax avoidance, as measured by the book tax difference (BTD) [effective tax rate (ETR)], contributing to the literature by confirming, in relation to current taxes, the theoretical prediction that penalties applied to directors are more effective, from the point of view of the tax authority, in controlling tax avoidance.

Book Tax Different, Kepemilikan Keluarga dan Persistensi Laba pada Perusahaan Go-Public Indonesia

The aims of this study are to examine the factors affecting book-tax difference (BTD) and analyze the influence of BTD and family ownership to earning persistence. This research use panel data with population of listed company in Indonesia Stock Exchange. The result shows significant correlation for all factors affecting BTD to BTD. Earning persistence test shows that both different value and/or sources in BTD give different implications to earning persistence. This research also find evidence that family ownership significantly influence the persistence of earning exclude when the value of BTD is large negative-coming from earning management and tax avoidance activity.

BOOK TAX DIFFERENCES, KEBIJAKAN HUTANG DAN PROFITABILITAS DAMPAKNYA TERHADAP PERUBAHAN KEUNTUNGAN PADA PERBANKAN UMUM SYARIAH DIINDONESIA

This study has the aim of testing the effect of the model partially or simultaneously, namely changes in the profits of Sharia General Banking in Indonesia which are thought to be influenced by booktax differences, debt policies and profitability. The population is all sharia commercial banks operating in Indonesia, using purposive sampling ten samples were selected. The classical assumption test is carried out first before testing the model, and the results are that the model being tested is free from the classical assumption problem. By using panel data regression test, it is obtained that simultaneously all variables have a significant effect on changes in the profits of Islamic banking in Indonesia. While the partial test shows that there is a permanent difference and debt policy has a negative and significant effect on changes in profits, temporary differences and profitability have a positive and significant effect on changes in profits.

Pengaruh Tax Planning Terhadap Nilai Perusahaan Pada Perusahaan Property & Real Estate Periode 2016-2020

This study aims to analyze the effect of Tax Planning on Company Value in property & real estate companies listed on the Indonesia Stock Exchange for the 2016-2020 period. Tax planning in this study is measured by cash effective tax rates and book tax difference as independent variables and firm value is measured by price earning ratio as the dependent variable. The sample in this study was purposive sampling with a total of 60 research data. The analysis technique used in this study is quantitative data analysis using the SPSS 16 statistical application. Based on the results of the analysis it is found that cash effective tax rates and book tax difference have an effect on firm value.

Analysis of the relationships between corporate reputation and tax avoidance of Brazilian companies

This article aims to analyze the relationship between corporate reputation and tax avoidance of Brazilian companies. Unlike previous research that observed reputational damage caused by tax reduction strategies deemed abusive or illegal, the purpose of this research is to analyze whether, once established, corporate reputation is likely to influence the level of tax avoidance of Brazilian companies. The research sample comprises a total of 180 publicly traded companies, totaling 1,800 observations in the period from 2010 to 2019. Panel data regression (fixed effect with FE-LSDV estimators and random effect - RE) was used to test the effects of corporate reputation on tax avoidance. The main results indicate that companies with a strong reputation are paying more taxes, on average, and are less aggressive in tax strategies. In addition, companies with a strong reputation have larger book-tax-differences (BTD).

Selisih Pajak, Profitabilitas, Ukuran Perusahaan dan Persistensi Laba

This study aims to determine the influence of book-tax difference, profitability, and firm size on earnings persistence. The data used in this study are LQ45 category companies listed on the Indonesia Stock Exchange for the 2015-2019 period. This research is quantitative and used a purposive sampling method with a total sample of 24 companies. The analysis used SPSS 25 by performing the classical assumption test, multiple linear regression test, hypothesis testing, and the coefficient of determination test. The results show that probability has a positive influence on earnings persistence. In contrast, permanent and temporary differences as proxies for book-tax differences and firm size have no significant influence on earnings persistence.

PENGARUH PROFITABILITAS, LEVERAGE DAN LIKUIDITAS TERHADAP BOOK-TAX DIFFERENCES PADA PERUSAHAAN SEKTOR INDUSTRI DASAR DAN KIMIA YANG TERDAFTAR DI BURSA EFEK INDONESIA PERIODE 2018 – 2020

From the test results using SPSS, it is known that the coefficient of determination (R Square) of 0.716 means that profitability, leverage and liquidity together affect the difference in book tax, namely 71.6%. Based on the analysis of multiple linear regression equations, it can be said that (1) Profitability has a positive and significant effect on the difference in book taxes in the Basic and Chemical Industry Sector companies listed on the Indonesia Stock Exchange for the 2018-2020 period. (2) Leverage has a positive and insignificant effect on the difference book tax on Basic and Chemical Industry Sector companies listed on the Indonesia Stock Exchange for the 2018 - 2020 period. (3) Liquidity has a positive and insignificant effect on the difference in book tax on the Basic and Chemical Industry Sector companies listed on the Indonesia Stock Exchange for the 2018 - 2020 period. Keywords: Book Tax Difference, Profitability, Leverage, Liquidity