Tax aggressiveness determinants

Abstract

Purpose - This study aims to examine the effect of capital intensity, inventory intensity, corporate social responsibility and good corporate governance on tax aggressiveness. Good corporate governance variables used in this study were proxied with independent commissioners and audit commitments.Method - This research focused on manufacturing companies listed on the Indonesia Stock Exchange in the period of 2016-2018. 177 samples were collected using a purposive sampling technique from 59 companies over an observation period of 3 consecutive years. The samples were then analyzed using a multiple linear regression.Result - The results of this study show that capital intensity has a positive and significant effect on tax aggressiveness, inventory intensity has a positive but not significant effect on tax aggressiveness, corporate social responsibility has no positive and significant effect on tax aggressiveness, Independent commissioner has a positive and significant effect on tax aggressiveness, and audit committee has a negative but significant effect on tax aggressiveness.Implication - The results show that the company with high capital intensity tends to be more aggressive on tax. Therefore, the tax authorities must be aware to companies with these characteristics.Originality - The addition of corporate social responsibility and good corporate governance as independent variables are thought to be related to the company’s tax aggressiveness.

Effect of Corporate Governance Structures, Political Connections, and Transfer Pricing on Tax Aggressiveness

“…Independent commissioners are commissioners who come from outside the company, who play an essential role as supervisors and directors for company operations to comply with the applicable regulations because they are not affiliated with the controlling shareholders, other members of the board of directors, and commissioners (Diantari & Ulupui, 2016;Apriyanti & Arifin, 2021). Agency theory states that the larger the number of independent commissioners, the better they monitor and control executive directors' actions concerning their opportunistic behavior (Jensen & Meckling, 1976).…”

“…The audit committee assists organs from the board of commissioners in supervising and directing management. Therefore, the audit committee can control the company to properly perform its authority in preventing the deviant actions contained in the financial reports through accurate reporting, not tax evasion (Apriyanti & Arifin, 2021). Based on agency theory, the higher audit committee member in the company can play a monitoring role to supervise the company's management activities and agency conflicts that occur due to management's desire to reduce tax aggressiveness (Lawati & Hussainey, 2021).…”

“…There were studies has shown that independent commissioners negatively affect tax avoidance (Maharani & Suardana, 2014;Santoso & Muid, 2014;Diantari & Ulupui, 2016;Lutfia & Pratomo, 2018;Gunawan et al, 2021). Meanwhile, the opposite study has shown that independent commissioners do not affect tax avoidance (Dewi & Jati, 2014;Puspita & Harto, 2014;Pradipta & Supriyadi, 2015;Mappadang, 2021;Lismiyati & Herliansyah, 2021;Apriyanti & Arifin, 2021;Sahrir et al, 2021). There were the studies that resulted in the audit committee having a positive effect on tax avoidance (Dewi & Jati, 2014;Idzniah & Bernawati, 2020;Sunarto et al, 2021), while the other studies have shown that the audit committee has a negative effect on tax avoidance (Maharani & Suardana, 2014, Diantari & Ulupui, 2016, and Apriyanti & Arifin, 2021.…”

“…Meanwhile, the opposite study has shown that independent commissioners do not affect tax avoidance (Dewi & Jati, 2014;Puspita & Harto, 2014;Pradipta & Supriyadi, 2015;Mappadang, 2021;Lismiyati & Herliansyah, 2021;Apriyanti & Arifin, 2021;Sahrir et al, 2021). There were the studies that resulted in the audit committee having a positive effect on tax avoidance (Dewi & Jati, 2014;Idzniah & Bernawati, 2020;Sunarto et al, 2021), while the other studies have shown that the audit committee has a negative effect on tax avoidance (Maharani & Suardana, 2014, Diantari & Ulupui, 2016, and Apriyanti & Arifin, 2021. The different results have shown that the audit committee did not affect tax avoidance (Puspita & Harto, 2014;Ardillah & Prasetyo, 2021;Gunawan et al, 2021).…”

The effect of sharia share selection based on financial ratio and corporate governance mechanism on the quality of company profit

“…The expertise possessed by the audit committee regarding financial and accounting reports, both in the use of certain accounting methods and ways to avoid risks, allows the company to be monitored and controlled (Apriyanti & Arifin, 2021). The audit committee is responsible for ensuring that the company complies with applicable laws and regulations, as well as ensuring effective control over conflicts of interest (Agustina & Mulyani, 2019).…”