Tax Avoidance Practices Research Articles

Pengaruh Ukuran Perusahaan, Kepemilikan Institusional, dan Konservatisme Akuntansi pada Tax Avoidance

This study aims to obtain empirical evidence regarding the effect of company size, institutional ownership, and accounting conservatism on tax avoidance in the Mining Sector Companies contained on the Stock Exchange in the 2015-2018. The sample was determined using the nonprobability sampling method with a purposive sampling technique, obtained by 11 companies with a year of observation for 4 years so as to obtain 44 observations. Data analysis techniques using the Multiple Linear Regression test with the SPSS program. The research result that the size of company and accounting conservatism give a negative effect on tax avoidance while institutional ownership has no effect on tax avoidance. This shows that the larger the size of a company and the more companies apply accounting conservatism, the lower the practice of tax avoidance.
 Keywords: Company Size; Ownership Institutional; Accounting Conservatism; Tax Avoidance.

Analyzing and Formulating a Statutory General Anti-Avoidance Rule (GAAR) in Indonesia

Dealing with the practice of tax avoidance in general, many countries have compiled and implemented their own general anti-avoidance rules (GAAR). This research aims to explore the potential of statutory GAAR in handling tax avoidance practices in Indonesia and SAAR formulas that are suitable for the Indonesian context. This qualitative research employed a case study approach. Results show that the application of SAAR and the principle of substance over form in Indonesia cannot yet be applied properly; thus GAAR is needed. It is expected that the implementation of statutory GAAR can accommodate the limitations of regulators in light of unknown and future tax avoidance schemes..
 Keywords: Tax-avoidance, tax planning, specific anti avoidance rule (SAAR), international tax

Pengaruh Tata Kelola Perusahaan, Leverage dan Return on Assets Terhadap Tax Avoidance

This study intends to test the influence of good corporate governance (GCG) by utilizing independent commissioners and the audit committee as proxies, leverage, and return on assets against tax avoidance. Population for the study is banking companies listed in the BEI from 2015 – 2017. By using purposive sampling method,
 29 banking companies were selected as samples of the study. All the data used are secondary data which have been already published. The results proved that only audit committee that affected the practice of tax avoidance while independence commissioners, leverage and return on assets did not have any impact on tax avoidance.
 Keywords: GCG, leverage, ROA, tax avoidance.

Exploring the Impact of Firm‐level Legality on Tax Avoidance

Although the topic of legality is receiving increasing interest in academic and policy debates, examining its economic effects at the firm level remains a relatively underexplored line of research. This study offers further advances to the existing literature by performing an examination of the relationship between corporate legality and tax avoidance. Based on a unique dataset of 1,168 private Italian companies and by exploiting a novel measure of corporate legality developed by the Italian Competition Authority, we provide evidence that firm‐level legality is positively associated with effective tax rates ..(i.e., lower tax avoidance practices). These findings are robust to a battery of additional tests and are informative for local policymakers and international investors since they suggest that legality is an important factor to which attention should be paid in scrutinizing corporate tax strategies.

Analysis of the effect of corporate social responsibility on tax avoidance with profitability and firm size as moderating variables

Companies that take benefits of natural resources are required to implement corporate social responsibilities (CSRs). Besides, they have an obligation to pay tax. CSR and tax have the same goal to improve the community welfare, while both are expenses for the companies. These similarities allow companies with high CSR activities to decrease the amount of tax payable through tax avoidance practices. The results of this study show that the higher the level of CSR activities, the higher the company's responsibility for its tax obligations. Moreover, CSR has stronger influence on decreasing tax avoidance if CSR is carried out by large companies. Profitability does not moderate the relationship because of the weakening economic conditions of mining industry. In addition, companies with high CSR activities assumed that tax payment became a part of CSR, so they did not consider CSR and tax payment to be separated and mutually replaceable.

Analysis of the effect of corporate social responsibility on tax avoidance with profitability and firm size as moderating variables

Companies that take benefits of natural resources are required to implement corporate social responsibilities (CSRs). Besides, they have an obligation to pay tax. CSR and tax have the same goal to improve the community welfare, while both are expenses for the companies. These similarities allow companies with high CSR activities to decrease the amount of tax payable through tax avoidance practices. The results of this study show that the higher the level of CSR activities, the higher the company's responsibility for its tax obligations. Moreover, CSR has stronger influence on decreasing tax avoidance if CSR is carried out by large companies. Profitability does not moderate the relationship because of the weakening economic conditions of mining industry. In addition, companies with high CSR activities assumed that tax payment became a part of CSR, so they did not consider CSR and tax payment to be separated and mutually replaceable.

Debt and Transfer Pricing: Implications on Business Tax Policy

In this article we introduce model to describe the behavior of a multinational company (MNC) that operates transfer pricing and debt shifting, with the purpose of incrementing its value, intended as the sum of equity and debt. We compute, in a stochastic environment and under default risk, the optimal shares of profit and debt to be shifted and show how they are affected by exogenous features of the market. In addition, by means of a numerical analysis, we simulate and quantify the benefit arising from the exploitation of tax avoidance practices and study the corresponding impact on MNC's fundamental indicators. A wide sensitivity analysis on model's parameters is also provided.

FACTORS AFFECTING TAX AVOIDANCE IN INDONESIA AND SINGAPORE PRACTICES: A VIEW FROM AGENCY THEORY

Extant studies highlight that an act of illegally tax planning by the tax manager in companies is due to the information asymmetry allowing managers to hide actual information in seeking substantial compensation from the profit gained by companies for his/her own benefit. The main objective of the research is to investigate the tax avoidance model from two neighbor countries: Indonesia and Singapore, that have a different weight of Effective Tax Rate (ETR) reflecting an agency theory perspective in the tax avoidance practice. The multiple regression test in analyzing the influence of capital intensity, leverage, institutional ownership, compensation for fiscal losses, and firm size on tax avoidance was applied to 90 and 82 public listed manufacturing companies in Indonesia and Singapore, respectively. Analysis of the data used is quantitative using secondary data. More specifically, the result of the study indicates that capital intensity, leverage, and tax incentive are established as three important factors affecting tax avoidance in Indonesia. As for Singapore practice, except for firm size, none of the mentioned variables found as major determinants of tax avoidance in Singapore. The implications of this study provide information for shareholders and the government to further look performance and value of the company(s) in relation to the tax planning related-activities.

The Role of Earning Quality, Audit Quality and Independent Commissioner in Suppressing Tax Avoidance Practice

Aggressive tax planning is a threaten government revenue in many countries, so tax avoidance has become an international political issue nowadays. The objectives of this study were to observe the trends in tax avoidance practices in manufacturing companies in Indonesia and to examine the influence of earnings management, proportion of independent commissioners, and audit quality toward the possibility of companies in reducing tax costs. The practice of tax avoidance is measured by the Cash Effective Tax Rate (CETR) as it is not affected by changes in estimates such as valuation allowance or tax protection. Aggressive practices in minimizing the tax burden still occur in Indonesia, but this study showed encouraging evidence since the trend of tax avoidance practices is gradually decreasing. The result of testing factors which affect tax avoidance that the variable proportion of independent directors was proven to be able to reduce the action of reducing the tax burden, thus independent party supervision needed to be improved. The government needed to enforce regulations through increased transparency and disclosure, closing the loophole on taxation rules, and raising awareness for taxpayers through improving tax policies and increasing accountability for channeling tax funds.

An Inquiry into Earning Management Motives: Evidence from Pakistani Distressed and Non-Distressed Firms

This research takes in view the motives that drive opportunistic managers in the Pakistani corporate world to manipulate firm earnings in different financial circumstances by resorting to real (REM) and accrual (AEM) earning management to reap their self-interests. The present study undertakes 188 distressed and 37 non-distressed firms for the sample period of 2010-2017. The summary stats confirm that both in distressed and non-distressed firms’ managers resort to REM practices more than AEM. The factors that urge mangers to take REM practices in distressed firms i.e., debt covenant restriction, managerial ownership and tax avoidance needs to be amended in such a way that it demotivates managers for carrying such practices in distressed firms. The factors that influence AEM practices in distressed firms are debt covenant restrictions, institutional ownership, highly valued firms and managerial ownership whereas in non-distressed firm these factors are debt covenant and effective tax rate. In non-distressed firms motives that urge mangers to adopt REM, practices are raising additional capital and tax avoidance practices.

The Effects of Immigration on Labour Tax Avoidance: An Empirical Spatial Analysis

We investigate whether the geographic concentration of non-EU immigrants in the various Italian provinces affects labour tax avoidance (LTAV) practices adopted by firms located in the same provinces, as well as in the neighbouring provinces, and operating in construction and agriculture industries that mostly employ immigrants in Italy. For this purpose, we develop a LTAV proxy based on the financial accounting information of a sample of 993,606 firm-years, disseminated throughout the 108 Italian provinces, over the period 2008–2016. Our results, based on a Spatial Durbin Model panel regression, reveal a statistically significant positive association between the concentration of non-EU immigrants and LTAV at province level, as well as the presence of spillover effects among neighbouring provinces. Our findings are robust to several additional analyses, including instrumental variable estimations. Our study provides empirical support to previous structuralist or marginalization theories holding that socioeconomically marginalized groups, such as non-EU immigrants, are more likely to be involved in labour exploitation practices, which could underlie our LTAV outcomes. Furthermore, it supports the need for tax authorities to strengthen labour inspections, coordinated at national level, especially in those contexts where non-EU immigrants are mostly employed. On the other hand, a greater social integration, assistance, and recognition of rights of immigrants may help to alleviate their situation of weakness that makes them more vulnerable to LTAV practices. Finally, tackling LTAV, associated with the underemployment of immigrants, may prevent its negative effects for society arising from the reduction of public resources to sustain the social welfare and finance public goods and services.

Thin Capitalization, Transfer Pricing Aggresiveness, Penghindaran Pajak

The increase in tax revenue in Indonesia is not accompanied by an increase in tax ratio The low tax ratio indicatestax avoidance practices in Indonesia. Some tax avoidance practices can be conductedthrough transfer pricing and thin capitalization.This study is aimed to examine empirically the effect of thin capitalization as well as transfer pricing aggressiveness on tax avoidance practice in Indonesia. This study uses manufacturing companies which are listed on Indonesia Stock Exchange (IDX) within the period 2013-2015. Using purposive sampling, the selected samples in this study are 90 companies, so the total sample is 270 samples. The hypothesis examination used in this study is multiple linear regression analysis of panel data.The results of this study suggest that thin capitalization is positively associated with tax avoidance,while transfer pricing aggressivenessis not associated with tax avoidance.

Corporate Tax Avoidance Practices: An Empirical Evidence from Nigerian Firms

Abstract This study examined the existence of corporate tax avoidance practices among the public listed firms in Nigeria. Secondary data were obtained from annual published reports from selected Nigerian firms listed in Nigeria stock exchange from 2006 to 2017. Panel Data analysis technique was used to analyse the effect of independent variables (Thin capitalization, Leverage, Firms Size, Transfer Pricing, and Intangible Assets) on dependent variable (Corporate Tax Avoidance). The result showed that thin capitalisation, firm size, profitability, leverages, intangible assets, and transfer pricing are significantly related with corporate tax avoidance. Thin capitalisation, profitability and transfer pricing are the primary driver of corporate tax avoidance. It is concluded that there are several corporate tax avoidance practices employed by Nigerian firms to aggressively reduce their corporate tax liabilities in Nigeria.

Does Political Connection, Executive Character, and Audit Quality Affect the Tax Avoidance Practice? Evidence in Indonesia

<p class="Abstract">This study aims to know and find empirical evidence about the effect of political connection, executive characters, and audit quality on tax avoidance practice in Indonesia. This research uses secondary data with database collection technique using annual report of the manufacturing companies that are listed in Indonesian Stock Exchange (IDX) period 2013 – 2017. Using purposive sampling, this study obtained 51 companies which fulfill the criteria of 165 companies as total population, so the total observation for 5 years is 255 samples. The data examination in this study uses multiple regression analysis with data panel. Tax avoidance practice in this research proxied by Cash ETR. The results of this study indicate that variable political connection has significant positive effect on tax avoidance, which means that the average company uses their political connections to lower tax payments. Variable executive characters has no significant effect on tax avoidance, which means that the characters of executive not yet able to become a standard to determining tax avoidance practice. Variable audit quality indicated no significant effect on tax avoidance, which means KAP the big four who has a good quality hasn’t been able to conclude the company not doing tax avoidance practice.</p>

Evaluasi Pelaksanaan Program Amnesti Pajak Tahun 2016 Di Indonesia

Income from the tax sector is generally the main income for all countries in the world in order to finance its activities. Increased revenue from the tax sector is often hampered, due to the large tax evasion and tax avoidance activities. Tax evasion and tax avoidance practices are triggered by the practice of low tax rates and other facilities provided by the tax heaven countries. In order to combat tax evasion and tax avoidance, the approach taken by each country is different. But basically approach done can be distinguished on soft apporach and hard approach. One approach that is classified as a soft approach is a tax amnesty program. In 2016 the Government of Indonesia is implementing a tax amnesty program based on Law Number 11 of 2016 concerning Tax Amnesty applied from 1 July 2016 to 31 March 2017. This paper will evaluate the successful implementation of the tax amnesty program that has been implemented in Indonesia. Evaluation is based on the achievement of 3 objectives, namely the repatriation of assets from abroad, expansion of the tax base and increase in tax revenue for the short and long term. From the point of asset repatriation, the tax amnesty program is considered quite successful, because although the target of asset repatriation is not achieved, but the asset repatriation has reached 30.54% of the estimated financial assets abroad. From the point of view of the expansion of the tax base, the number of declarations and repatriation reaches Rp. 4,737.56 trillion has exceeded the target. Meanwhile, from the point of view of increasing short-term tax revenues, the objective of the amnesty program can be considered quite successful, because it contributes 10.15% to the average amount of tax revenue in 2016 and 2017, although it has not been able to raise the growth rate of overall tax revenue for the year 2016 and 2017. Increased tax revenues for the long term can not be evaluated, because the tax amnesty program was completed 1 year ago.

PERAN KEPEMILIKAN INSTITUSIONAL DALAM MEMODERASI FAKTOR-FAKTOR YANG MEMPENGARUHI TAX AVOIDANCE

Tax revenue in Indonesia has not reach an optimum number because the revenue target has not fulfilled yet. This condition alleged because the tax avoidance practices that done by company is still high. This phenomenan becomes background of the need to examine what factors that influence the company in practicing tax avoidance. This research aims to analyze the influence of executive character, firm size, and profitability on tax avoidance with institutional ownership as moderating variable. The population in this study is property, real estate, and construction companies listed on the Indonesia Stock Exchange (IDX) in 2013-2017. The sampling technique used is purposive sampling technique and obtain 35 samples with 175 units of analysis. The data analysis tool used is panel regression using the Eviews program version 9.0. The result of this study prove that the executive character and firm size has a significant positive effect on tax avoidance, while profitability does not significantly influence on tax avoidance. Meanwhile, institusional ownership is not able to moderate the influence of executive character, firm size and profitability on tax avoidance.

Management Compensation, Gender Diversification, and Executive Preferences on Tax Avoidance of IDX Manufacturing Companies

This study aims to analyse the effect of management compensation, gender diversification, and executive preferences on tax avoidance practices in Indonesia Stock Exchange (IDX). Conceptually, this study uses mediating variables of executive gender diversification and executive preferences in the relationship between management compensation and tax avoidance. This study uses balanced panel data with a total of 404 observations from manufacturing companies listed on the Indonesia Stock Exchange in the 2015-2018 period. The results showed a negative assessment of management compensation on tax avoidance. However, further examination revealed that management compensation will positively influence tax avoidance if compensation is given to the board of directors who have gender diversification characteristics in the composition of their members indicated by at least one female director on the board of directors. Lastly, the greater the management compensation given to executives who have risk taker characteristics will also make directors to do greater tax avoidance.

The Role of Country by Country Reporting in the Regulation of Aggressive Tax Planning Strategies Employed by Multinational Enterprises

At present, the determination of tax rate and tax collection are a matter of sovereignty under the domain of Nation-states. However, the ability of the domestic governments to tax Multinational Enterprises has been significantly challenged by two developments that have reshaped the economy, namely digitalization and globalization. In order to counter the practice of tax avoidance widely employed by global businesses, the OECD led a number of other institutions in the recognition of the need for an enhancement of transparency, through the introduction of Country-by-Country Reporting (CbC Reporting). However, the measure in the form recommended by the OECD, does not provide a powerful and systematic instrument to tackle tax avoidance, as it presents a series of flaws that hamper its efficacity. The paper argues in favor of a bold approach to disclosure, and reiterate the need to grant all stakeholders, the right to access information concerning global businesses, on a country-by-country basis. Public CbC Reporting is deemed to represent a turning point in the fight against tax avoidance. In fact, it would entail a large number of benefits, it would give the fight against tax avoidance a systematic nature, as detection of financial crime is, at present, strictly connected with the appearance of major scandals.

Product Market Threats and Tax Avoidance

In this paper, we investigate whether product market threats significantly impact firms’ tax avoidance. By adopting the market fluidity measure introduced in Hoberg, Phillips, and Prahbala (2014) as a proxy for product market threats, we find that product market threats increase the level of tax avoidance activities for the firms which are pursuing such activities more than their target tax avoidance level (thus, actively tax-avoiding firms). However, that relationship is not existent in the firms which have not been engaged in tax avoidance more than their target level. In addition, among these firms with active tax avoidance practice, especially the firms with worse corporate governance structure, lower levels of monitoring, higher information asymmetry, and lower financial flexibility are more likely to experience the positive relationship between product market threats and their tax avoidance. Further evidence suggests that higher levels of tax avoidance driven by product market threats do not come with higher levels of tax uncertainty and positively affect firms' profitability. This result highlights the decoupling relationship between tax avoidance and tax uncertainty as suggested by previous literature.

The Effect of Public Share Ownership on Tax Evasion: Study on Companies Listed in Indonesia Stock Exchange Between 2008-2011

Increasing the concentration of ownership and control of public companies in Indonesia is more likely to increase the likelihood of earnings management practices through tax avoidance. The high percentage of concentrated ownership has encouraged the government and capital market regulators to more broadly promote regulations related to tax incentives and public ownership in order to encourage more transparent practices. This study aims to analyze the policy of public ownership of tax avoidance conducted by Indonesian public companies, specifically after the regulation of Government Regulation No. 81 of 2007 concerning Reduction of Income Tax Rates for Domestic Corporate Taxpayers in the Form of Public Companies, and Minister of Financial Regulation No. 238 / PMK.03 / 2008 concerning Procedures for Implementing and Supervision of Granting Tariff Reductions for Domestic Corporate Taxpayers in the Form of Public Companies. More specifically, this study aims to analyze the impact of public share ownership on tax avoidance by Indonesian public companies. The samples of 320 observations that conducted (firm-years) during 2008-2011. The software that will be used in data analysis is STATA 12. The results showed that the increase in public ownership have a significant effect in improve the practice of corporate tax avoidance, which it is also evidenced by the significant differences in the corporate tax avoidance practices before than after the enactment of these regulations. The findings show that the greater the proportion of public share ownership would result the decreasing number of ETR or ETRC which can be indicated that the greater the practice of corporate tax avoidance. Furthermore, the ROA variable has a negative and significant effect on corporate tax avoidance practices, meaning that the greater the profitability ratio of a company can cause the reported and paid tax burden to decrease.