Cash ETRs Research Articles

An empirical study on anti-corruption efforts and tax avoidance: Evidence from Mongolia

In this paper, we investigate the impact of anti-corruption efforts on tax avoidance, which has not been considered in Mongolia. Our prior study aimed to reveal corporate tax avoidance within Mongolia. The findings indicated that over half of all sample entities engage in tax avoidance, both in the short and long term. Building upon this empirical evidence, we have proceeded with further research in this area. To achieve this, we analyze the number of corruption cases that were successfully resolved in court, along with the reimbursements made to the government. Based on our analysis, we propose that these resolved cases and reimbursements are likely to impact corporate tax avoidance. Here, we employ GAAP ETR measurement method by Dyreng to detect tax avoidance in entities, supplemented by the CASH ETR for additional analysis. Using panel data consisting of 106,286 firm-year observations, encompassing 15,184 distinct entities across the years 2013-2019, we find that there is a significant and negative relationship between anti-corruption efforts and tax avoidance. In conducting robustness checks on the main findings, we vary the estimation method and dependent variable by applying the CASH ETR. The results of these additional analyses consistently support the main findings, confirming their robustness.

The Relationship between Tax Incidence and Tax Avoidance in Indonesia’s Industrial Sector

Taxes are believed to distort how firms behave and market equilibrium. Since tax reduces equity returns, firms will intuitively reduce tax costs through tax avoidance and any other production or operational cost to achieve the highest returns. One of the production costs that often under hair cross is labour cost. Firms can use their bargaining power to reduce wages to offset tax costs. On the other hand, firms' attempt to reduce wages might, in turn, lower their production output. Lower output means a lesser taxable base and less marginal benefit for tax avoidance. Lower output also means lower equity returns and might incentivize firms to do more tax avoidance. Therefore, many researchers are looking for answers to the following question: how much do firms avoid tax in the face of their capability to shift the tax burden to labour? This study aims to investigate the relationship between tax incidence and tax avoidance in the industrial sector in Indonesia. While previous studies have shown solid empirical support for this relationship, Indonesia's employment conditions and industrial characteristics differ from those in the United States and other countries. The data for the study was taken from the reports of IDX-listed companies in the industrial sector ranging from the year 2018 to the year 2022. The data analysis uses Generalized Least Square (GLS) panel data regression. Using education level as a proxy for tax incidence and cash ETR as a proxy for tax avoidance, the authors found no significant connection between them because the industrial sector predominantly employs a much higher number of workers with low education levels compared to those with higher education. Additionally, highly educated workers in Indonesia often face job market challenges; thus, horizontal mismatches happen. Instead, other variables like sales growth, leverage, firm size, SG&A expenses, and loss carryforward significantly influence tax avoidance.

The reputation costs of tax avoidance of financial institutions

This paper investigates empirically if financial institutions have reutation cost by practicing tax avoidance. We found that the reputation costs restrain Banks from being more aggressive in practicing tax avoidance. Thus, in this paper we empirically examine whether there are reputation costs for financial institutions when engaging in tax avoidance, especially during the protest period. For this purpose, we use a sample of 20,129 firm-years of U.S. public financial firms from Compustat, Capital IQ, CRSP and I/B/E/S. We use two measures of tax avoidance: GAAP ETR and CASH ETR. As proxies for reputation costs we use cumulative abnormal stock return, analysts’ recommendations and credit rating. The results confirm both hypotheses stating that financial institutions have reputation costs when practicing tax avoidance and during the protest period these costs are higher. The results also show that financial institutions that practice tax avoidance have a negative impact of 11.18% in their cumulative abnormal stock return. We also find that tax avoidance negatively affects analysts’recommendations by in 2.5% and during the protest period this effect is 5.9%. Furthermore, the results of sensitivity testing with quantile regression indicate that a higher level of tax avoidance is associated with higher reputation costs. This paper of the study contributes both to the financial and tax avoidance literature, especially with respect to the reputation costs of tax avoidance for financial institutions. This is one of the first studies to empirically investigate the reputation costs of financial institutions when practicing tax avoidance.

PENGARUH PROFITABILITAS, UKURAN PERUSAHAAN, LEVERAGE TERHADAP TAX AVOIDANCE (Studi Empiris pada Perusahaan Manufaktur, Sektor Industri Barang Konsumsi, Sub Sektor Industri Makanan dan Minuman yang Terdaftar di Bursa Efek Indonesia Tahun 2017 sampai 2021)

This study aimed to analyze influence of profitability on tax avoidance, firm size on tax avoidance, leverage on tax avoidance, as well as analyze influence of profitability, firm size, and leverage simultaneously against tax avoidance.Measuring tax avoidance in this study using the CASH ETR, profitability using return on asset (ROA), firm size using SIZE and leverage using debt to equity ratio (DER) . The population in this research are the manufacturing companies in the consumer goods industry sector, food and beverThe sampling technique is a purposive sampling method age industry sub sector. listed in Indonesia Stock Exchange for year 2017-2021. The sampling technique is a purposive sampling method by considering criteria-criteria, which result for 75 data sample. The analysis method uses descriptive statistic analysis and regression analysis with SPSS version 26.Descriptive statistical test results showed an average of 28,56% CASH ETR indicated high levels of the tax avoidance. Regression test results shows that variabel of the profitability and leverage have a significant effect on tax avoidance, while firm size not effect on tax avoidance. Simultaneous statistic test show that variabel of profitability, firm size, and leverage have a significant on tax avoidance.

Financial Statement Ratios, Audit Quality and Long-Term Tax Avoidance

Taxes are a burden for companies, reducing their profits, so they engage in tax planning to minimize the amount of tax they must pay. Tax avoidance is a way for companies to reduce or minimize tax payment obligations, but it does not violate the provisions or government policies in taxation. The purpose of this study is to assess and analyze the effect of financial statement ratios and audit quality on Tax Avoidance both short-term and long-term. The study introduces a method of measuring corporate tax avoidance, namely long-term cash ETR. This study finds that there is various effect in Indonesia, Thailand, and Malaysia on corporate tax avoidance.

PENGARUH FINANCIAL PRESSURE TERHADAP TAX AVOIDANCE DENGAN DISCLOSURE AND TRANSPARENCY SEBAGAI VARIABEL MODERATING

The research objective is to examine and analyze the effect of financial pressure on tax avoidance with disclosure and transparency as moderating variables in banking companies. The variables of this study consist of the dependent variable, namely tax avoidance as measured by Cash ETR and BTD, financial pressure as measured by ROA, CAR, DER, NPL and Size as independent variables and disclosure and transparency as moderating variables. This research was conducted on banking companies because the characteristics of the banking industry are different from other industries. This sector is very closely related to good corporate governance because of regulations. Disclosure and transparency variables are added as moderating variables because the banking industry is a trust-based industry, to increase investor confidence, banks need to increase transparency and accountability. The research method uses causality, the data used is secondary. The data collection procedure is carried out using the documentation method, data from the Indonesia Stock Exchange (www.idx.co.id). The population is banking companies listed on the Indonesia Stock Exchange in the period 2014-2020, the sampling technique uses purposive sampling and the number of research samples is 49 companies. Data analysis techniques and hypothesis testing with the help of PLS. The results show that financial pressure has a negative effect on tax avoidance and disclosure and transparency cannot moderate the relationship between financial pressure and tax avoidance. Keywords : Tax Avoidance; Financial Pressure; Disclosure and Transparency

The effect of governance quality on tax avoidance: Evidence from Mongolia

In this study, we investigate the effect of governance quality on tax avoidance in entities. In our prior study(Enkh-Amgalan & Batbayar, 2022), we aimed to detect tax avoidance in all operating entities in Mongolia by employing the long-run cash effective tax rate(CASH ETR) developed by Dyreng, Hanlon, & Maydew(2008). The findings indicated that more than 80 percent of the sample entities consistently avoided taxes for the long-term regardless of their size and location. Thus, this study aims to examine the factors that affect the activity. To detect tax avoidance in entities, we apply effective tax rate measurements (GAAP ETR or CASH ETR) by Dyreng, Hanlon, & Maydew(2010). To do so, we exercise the two-stage least square and general method of moments regression models. Using panel data of 18,408 firm-year observations, corresponding to 3,068 unique entities covering the consecutive years of 2013-2019, we find a significant and negative relationship between governance quality and tax avoidance. For the robustness checks, we alter the estimation methods. The findings of the additional analyses are all robust to the main results.

Using the Linear Cash Taxes Paid Model in Accounting Research: Developing a Tax Model That Permits the Inclusion of Loss-Years

Accounting tax researchers generally do not use a linear tax function to test for corporate tax avoidance. Stemming from the cash ETR function from Edwards, Kubata, and Shevlin (2021) we develop the linear cash taxes paid model where cash taxes paid are regressed on an intercept and pretax income. We find that U.S. MNEs achieve greater levels of tax avoidance with regards to taxes that are a function of current pretax income; whereas, U.S. domestic corporations achieve greater levels of tax avoidance with regards to taxes that are independent of current pretax income arising from book-tax differences. Overall, our findings complement the findings of Edwards et al. (2021), Lampenius, Shevlin, and Stenzel (2021), and answers the call for the inclusion of loss years when analyzing corporate tax avoidance (Hanlon and Heitzman 2010).

KEPEMILIKAN MANAJERIAL DAN KEPEMILIKAN ASING DALAM MEMODERASI PENGARUH PENGHINDARAN PAJAK TERHADAP NILAI PERUSAHAAN

This study aims to examine the effect of tax avoidance on firm value and to examine the role of managerial ownership and foreign ownership in moderating this relationship. This research uses quantitative methods and is carried out on consumer goods industry sub-sector companies listed on the IDX in 2016-2019. Using a total sample of 28 companies, it was applied with 112 total observations. This study uses Cash ETR and Current ETR to measure tax avoidance, adjusted Tobin's Q to measure firm value, managerial ownership and foreign ownership as moderator variables, and company age and size as control variables. Using panel data method, the findings are that tax avoidance has a significant positive effect on firm value. Meanwhile, the managerial ownership weakens the relationship between tax avoidance and firm value, and foreign ownership weakens the relationship between tax avoidance and firm value. Moreover, applying Cash ETR or Current ETR as a proxy produce the different results.

The effect of employee satisfaction on effective corporate tax planning: Evidence from Glassdoor

Human capital plays a substantial role in the corporate tax planning process, and thus a firm's ability to attract, retain and motivate talented employees is a potential determinant of tax planning outcomes. Motivated by the premise that employee satisfaction is a key driver of productivity, I investigate the relationship between employee satisfaction ratings, collected from the website Glassdoor, and corporate tax planning outcomes. I find that firms with higher employee satisfaction ratings exhibit significantly greater tax avoidance as well as lower tax risk. A one-point increase in overall employee satisfaction ratings, on a five-point scale, is associated with a 2.6 percentage point decrease in cash effective tax rates (Cash ETRs) and a 0.20 standard deviation decrease in Cash ETR volatility. These results are stronger for firms with larger corporate tax departments, which rely more on employees to manage the tax planning process. I also find that employee satisfaction is negatively associated with UTB reserves, indicating that the increased tax avoidance is unlikely to arise from aggressive tax positions. Finally, through path analyses, I find that employee satisfaction can influence a firm's tax outcomes by reducing tax department turnover and improving the firm's internal information environment. Overall, my findings are consistent with the premise that employees play a substantial role in implementing tax avoidance strategies and mitigating tax risk, thus managers who adopt a strong work culture and employee-friendly policies can attain beneficial tax outcomes.

Tax Avoidance, Tax Risk, and Corporate Governance: Evidence from Korea

This study examines the association between the effective corporate tax rate and the volatility of future effective corporate tax rates in Korean companies. We analyzed the effect of corporate governance on the association between tax avoidance and tax risk. Our sample is comprised of all the firms listed on the Korea Composite Stock Price Index market. We measure each firm’s tax avoidance as GAAP ETR, Cash ETR, and BTD, and use the corporate governance rating of the Korea Corporate Governance Service to measure corporate governance. Our results show that the volatility of the effective corporate tax rate and the effective corporate tax rate would have a significant negative association. Our results show that tax risk decreases when the corporate tax avoidance level increases and the tax risk increases when the corporate tax avoidance level decreases. In addition, we find that the better the corporate governance structure, the higher the level of supervision and control of managers, thereby mitigating the impact of tax evasion on future corporate tax risk. The findings of this study regarding tax avoidance and corporate governance are important for investors because tax risk can significantly affect investor welfare.

The Impact of Tax Planning on Firm Value

The purpose of this research to determine the effect of tax planning that is measured using Cash ETR and Book Tax Difference (BTD) on company value. In addition to that, the purpose of doing tax planning is also to streamline corporate tax expenditures following applicable regulations, so that with the existence of corporate tax planning can estimate the company's tax expenses. This study uses the dependent variable that is the value of the company that is proxy using Tobins' Q while the independent variable is tax planning which is proxy using Cash ETR and Book Tax Different. The control variables used in this study are Size and Leverage. The samples used in this study were all manufacturing sector companies in a row from 2016 to 2018 with a total sample of 135 companies for 3 consecutive years. This study uses the Eviews 9 test tool and uses a multiple regression test. The results of this study indicate that Cash ETR has a positive effect on firm value while Book Tax Different has a negative effect on firm value.

HUBUNGAN KOMPLEKSITAS INFORMASI (TRANSAKSI PIHAK BERELASI DAN PENGHINDARAN PAJAK) DAN BIAYA AUDIT

The purpose of this paper is to examine the relationship of information complexity and audit fee. The complexity of information comes from related party transaction and tax avoidance. Related party transaction are measured by the sum of sales, purchases, loans and loans between related parties. Tax avoidance is measured by Cash ETR. The population of this study is all companies listed on the Indonesia Stock Exchange (IDX) during the period 2013-2017. The final sample in this study was 241 observations.
 The results of this study are tax avoidance does not have a positive relationship on audit fee. Then, related party transaction have a positive effect on audit fee. In addition, this study also examined the role of institutional ownership on the relationship of information complexity (related party transaction and tax avoidance) to audit fee. This study reveals that institutional ownership has been shown to weaken the relationship between tax avoidance and audit fee. With the existence of institutional ownership as good external monitoring, the effect of tax avoidance on audit fee is expected to be minimized. Along with monitoring of institutional investors, the risks faced by auditors will be reduced in auditing and this will have an impact on audit fee.

PENGARUH KEBIJAKAN DIVIDEN TERHADAP NILAI PERUSAHAAN DENGAN VARIABEL MEDIASI PENGHIDARAN PAJAK

ABSTRACT The purpose of this study is to examine the factors that affect the value of the company in the property and real estate sub-sector companies at IDX. The method in this research is quantitative. Secondary data in the form of annual financial reports from 8 Property & Real Estate Sub Sector Companies are the data used. Research variables are Dividend Pay out Ratio / DPR (X1), Cash Effective Tax Rates / Cash ETR (X1), and Firm Value / Q (Y). The data analysis method used is path analysis. The result of model 1 test states that dividend policy (DPR) has no effect on Q with a significant value (-0.301> 0.212) and tax avoidance (Cash ETR) has an effect on Q where the value is significant (-0.023> 0.034). The results of model 2 test explain that dividend policy (DPR) affects tax avoidance (Cash ETR) with a significance value (0.046> 3.95). Based on the findings from the research, it can be concluded that the presence of tax avoidance completely mediates the effect of dividend policy on firm value.

International Diversification, Tax Avoidance, and Chaebol: Evidence from Korea

Purpose – Utilizing a large sample of Korean firms, this study examines international diversification impacts on corporate tax avoidance and whether firms affiliated with large business groups (known in Korean as “chaebol”) reinforce the relationship between international diversification and tax avoidance. Design/methodology – This paper hypothesizes that 1) international diversification is likely to increase tax avoidance, 2) the positive effect of international diversification on tax avoidance is likely to be more pronounced for chaebol firms. We examine the hypotheses by using Korean firms listed in the Korean stock market between 2011 and 2016. We employ the number of foreign subsidiaries and the entropy index as proxies for international diversification and CASH ETR and GAAP ETR as proxies for tax avoidance. Findings – Our findings are summarized as follows. First, we have found that as firms are more internationally diversified, tax avoidance increases. It means that international diversification can be employed as a method of reducing the tax burden. Second, firms affiliated with chaebol are strengthened by the positive relation between international diversification and tax avoidance. It is interpreted that chaebol firms have more effective opportunities to reduce taxes than other firms. When entering foreign markets, they can share experience and resources to decrease taxation within the large business group. Originality/value – This study provides empirical evidence regarding the tax effect of international diversification. Unlike prior studies, international diversification is positively related to tax avoidance in Korea. In addition, we present additional evidence on the chaebol effects of international diversification on tax avoidance, in which they have an advantage to reduce taxes using transfer pricing through related party transactions, income shifting to low tax rate countries, and establishing subsidiaries in tax havens.

The Effect of Tax Avoidance, Leverage, and Managerial Ownership on Firm Value With Corporate Transparency as a Moderating Variable

This study aims to determine the effect of tax avoidance, leverage, and managerial ownership on firm value with company transparency as a moderating variable. Tax Avoidance is measured by CASH ETR, Leverage is measured by DER, Managerial ownership is obtained from annual reports on mining companies that are listed on the IDX. This research was conducted on mining companies that have been listed on the Indonesia Stock Exchange (BEI) in 2016-2018. This research was conducted using quantitative methods, using MRA data analysis. The results of this study indicate that (1) Tax Avoidance has an effect on Firm Value, (2) Laverage has an effect on Firm Value, (3) Managerial Ownership has an effect on Firm Value, (4) Transparency is able to moderate the effect of Tax Avoidance on Firm Value, (5) Transparency is able to moderate the effect of leverage on firm value, (6) transparency is able to moderate the effect of managerial ownership on firm value.

Covid-19 and corporate tax avoidance: Measuring long-run tax burdens as an alternative bailout test

This study fills the gap in the tax authority’s Covid-19 financial aid verifications by examining, and nominating, Long-run ETR (Dyreng et al., 2008) as the better corporate tax avoidance measure in excluding tax evader firms from the broad stimulus programs. Analysing confidential tax returns of 4,752 largest firms (32,120 firm-years) in Indonesia over 2009 to 2017 periods, this study found 18.12 percent of total sample firms is able to retain its Long-run ETR below 10 percent, which indicates continual tax avoidance activities by these firms during observation periods. Moreover, applying univariate and multivariate Ordinary Least Squares and Panel Data estimations, this study reveals, relative to other tax avoidance measures, Lagged Cash ETR (Lisowsky, 2010; Lisowsky et al., 2013) present the most consistent reliability in predicting long-run income tax burdens. Thus, this study asserts, in the conditions of computing Long-run ETR is costly and impractical (i.e. because of data unavailability), tax authority and policymakers can directly analyse firms’ Lagged Cash ETR to gauge their long-run income tax burdens and tax compliance behaviours prior the economic downturn.Â

Relationship Between Corporate Social Responsibility Disclosure, Corporate Governance, And Tax Avoidance

This study aims to examine the effect of corporatesocial responsibility disclosure on tax avoidance with corporate governance as moderation variable. The disclosure of corporate social responsibility in this study is measured using performance indicators from Global Reporting Initiative (GRI) 4.1. The score of corporate governance is measured using ASEAN CG Scorecard, while tax avoidance is measured by Cash ETR. The sample in this study is a manufacturing company listed on the Indonesia Stock Exchange in 2018. This study refers to Lanis and Richardson (2012) which found that, the higher the disclosure of social responsibility, the lower the tax avoidance. This study also refers to Salhi et al. (2019) which found that, if corporate governance has been performed well, companies are less likely to do tax avoidance. The results of the study showed that corporate social responsibility and corporate governance had no effect on tax avoidance. Likewise, corporate governance cannot moderate the effect of corporate social responsibility on tax avoidanceKeywords: corporate social responsibility disclosure, corporate governance, tax avoidance, GRI, Asean CG Scorecard, Cash ETR

DAMPAK PERUBAHAN TARIF PAJAK BADAN TERHADAP TAX AVOIDANCE DI INDONESIA

This study aims to purpose the impact of changes in corporate tax rates to tax avoidance in Indonesia. The samples are manufacturing companies listed in Indonesia Stock Exchange which published reporting statement during 2007-2014.The sampling technique used is purposive sampling and obtained 25 companies with data processed about 200. The independent variable in this study are tax avoidance before tax rates changes (X1) and the tax avoidance after tax rates changes (X2), while the dependent variable is tax avoidance (Y). The analysis used descriptive statistical anaylsis, test Kolmogrov-Smirnov, and different t-test with used paired sample test as tool. T-test used to know the level of differences tax avoidance between before and after tax rates changes tax with apply in corporate.Results from this study indicate that there are differences in tax avoidance before and after the change in corporate tax rates. Tax avoidance as measured by the Cash ETR and Current ETR shows that after changes in corporate tax rate higher tax avoidance or tax increases. Whereas measurement by Effective Tax Rates and Total Book Tax Differences shows that there are differences of tax avoidance lesser or reduced after the change in corporate tax rates.

PENGARUH KUALITAS AUDIT DAN KOMITE AUDIT TERHADAP PERILAKU PENGHINDARAN PAJAK (TAX AVOIDANCE)

This study aims to analyze the effect of audit quality proxied by the size of the auditor and audit tenure, while the audit committee proxied by the number and composition of audit committee competency expertise on tax avoidance behavior calculated by the Cash ETR (CETR) method. The population used is companies registered in the Jakarta Islamic Index (JII) in 2015 to 2019, using purposive sampling technique, 11 companies with 55 observations were obtained. This study uses panel data regression, with the best approach after testing the fixed effect model. The results of this study reveal that audit tenure has a positive effect on tax avoidance behavior and the number of audit committees has a significant negative effect on tax avoidance behavior, while auditor size and accounting background have no significant effect on tax avoidance behavior.