The Effect of Executive Share Ownership, Executive Compensation, and Independent Commissioners on Tax Avoidance

Abstract

Tax is a contribution that mandatory to be paid by personal and corporate taxpayers. The government used that tax for national development. Tax becomes a burden for companies that it is mandatory to be paid. If the companies got larger income so that the taxes that must be paid become larger too. On the other hand, if the companies got smaller income, the taxes that must be paid will become smaller. This leads the companies to avoid taxes that mandatory to be paid by reducing their amount of taxes. This is called tax avoidance. Tax avoidance influenced by several factors such as corporate governance. This study aims to determine the effect of executive share ownership, executive compensation and independent commissioners on tax avoidance. This study uses manufacturing companies listed on the Indonesia Stock Exchange (BEI) for the period 2015-2019. The sampling technique used was purposive sampling method. The sample used in this study were 52 manufacturing companies listed on the Indonesia Stock Exchange (BEI) during the 2015-2019 period. Hypothesis testing is done using multiple linear regression analysis with the SPSS 26 program and a significance value of 5%. The results of this study indicate that: (1) Executive share ownership has no significant effect on tax avoidance, (2) Executive compensation has significant positive effect on tax avoidance, (3) Independent commissioners have no significant effect on tax avoidance, (4) Executive share ownership, executive compensation, and independent commissioners are only able to explain tax avoidance by 3,1%.

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

“…From this explanation, it can be concluded that executive compensation has a significant negative effect on tax avoidance. The findings of this investigation agree with those of [9] and [10], but contrary to the findings of [11], [12], and [13] which showed executive compensation positive effect on tax avoidance. In other results in the table presented above, the significance value of Institutional Ownership (KI) is 0.076 which is greater than 0.05.…”

“…From this explanation, it can be concluded that independent commissioners have no significant effect on tax avoidance. The findings of this investigation agree with those of [11] and [12], but contrary to the findings of [43] and [45] which showed independent commissioners have a positive effect on tax avoidance. Based on the table presented above, it can be found that the t-test results show an Accounting Conservatism significance value as big as 0.163 which is greater than 0.05.…”

“…The provision of large bonuses allows managers to be more efficient in corporate taxation because executives will feel benefited by getting higher salaries so that they will further develop the company's presentation for the better, one of which is through efforts to increase corporate tax avoidance [12]. The study found that executive compensation has a negative effect on Tax Avoidance [11], [12], and [13]. H2: Executive compensation has a significant positive 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].…”

“…Other studies say that Executive Character has a negative effect on Tax Avoidance, namely research by [8]. Executive Compensation has a negative effect on Tax Avoidance in research performed by [9] and [10] but has a positive effect on Tax Avoidance in [11], [12], and [13]. In addition, studies conducted by [7] say that Executive Compensation does not affect Tax Avoidance.…”