The Effect of Corporate Governance on Tax Avoidance: Evidence from Indonesia

Abstract

This study aims to analyze the effect of the effectiveness of internal control, independent commissioners, the expertise of the board of commissioners, the number of audit committees, and the expertise of the audit committee on tax avoidance in manufacturing companies listed in Indonesia Stock Exchange period 2016-2018. This research is expected to be a material consideration for companies in making decisions related to taxation. The deductive approach used in this study by developing hypotheses based on relevant theories and findings of previous studies. Agency theory is used to see the effect of corporate governance on tax avoidance. The data collection method uses secondary data from the company's financial statements and annual reports according to specific criteria. Data analysis was performed by descriptive statistics and multiple linear regression. The results of the regression analysis prove that effectiveness of internal control and number of audit committees had a positive effect which means higher effectiveness of internal control and number of audit committees cause more tax avoidance, conversely independent commissioners and expertise of the board of commissioners had a negative effect which shows greater independent commissioners and expertise of the board of commissioners cause less tax avoidance. Another result claim that the expertise of the audit committee did not affect on tax avoidance. In contrast to previous studies, this study is more varied by combining several independent variables.
 JEL Codes: G34, H26.

Variables That Influence Tax Avoidance of Financial Sector Companies Listed on the Idx

“…With the increase in the number of independent commissioners, tax avoidance activities decrease, and an increase in the proportion of independent commissioners can prevent tax avoidance [40]. Independent commissioners will have a negative effect on Tax Avoidance [20] and [21]. H4: Independent commissioners have a significant negative effect on tax avoidance.…”

“…Other studies say that Institutional Ownership has a negative effect on Tax Avoidance, namely research by [18] and [19]. Furthermore, Independent Commissioners do not affect Tax Avoidance in [11] and [12], but have a positive effect on Tax Avoidance conducted by [20], dan [21]. Lastly, the Accounting Conservatism variable had a significant positive effect on Tax Avoidance in [22] and [23], but has a negative effect on Tax Avoidance in [7] and [24].…”