The Effect of Foreign Ownership and Foreign Board Commissioners on Tax Avoidance

Abstract

This study aims to provide empirical evidence that there is an influence of foreign ownership structure and the foreign board of commissioner against tax avoidance. In addition, the study Also tested based on tax avoidance tax incentives and non-tax incentives. The dependent variable in this study is tax avoidance is measured using five proxies items, namely the effective tax rate (ETR), cash effective tax rate (CETR), the book-tax difference (BTD), tax expenses to operating cash flow (TEOCF), and Tax Paid to Operating Cash Flow (TPOCF). The independent variables are foreign ownership structure, the foreign board of commissioner, tax incentives (profitability) and non-tax incentives (leverage and firm size). The theory tested in this research is the legitimacy theory. The sample of this research is the non-financial sector 53 companies listed in Indonesia Stock Exchange from 2012 to 2016. Data collection method using a purposive sampling technique.The method of analysis in this study using multiple linear regression analysis. The results of this study indicate that the structure of foreign ownership effect on tax avoidance through proxy ETR and CETR. The Board of Commissioners has an effect on tax avoidance through the proxy of TEOCF and TPOCF. Profitability has an effect on tax avoidance through proxy CETR, TEOCF, and TPOCF. Leverage Affects tax avoidance through proxy ETR, TEOCF, BTD, and TPOCF. Company size has no effect on tax avoidance. The results of this study will be useful for Academics to PROVE that foreign ownership structures and the foreign board of Commissioners are Able to limit tax avoidance measures, investors in decision-making, regulators in regards to the presence of the foreign board of Commissioners, as well as Researchers for future reference.

The impact of ownership structure on corporate tax avoidance with corporate social responsibility as mediating variable

“…Corporate tax avoidance is commonly defined as actions that reduce a firm’s taxes relative to its pre-tax accounting income (Christensen et al , 2015; Hanlon and Heitzman, 2010). In fact, taxes have been considered a material cost for companies and minimize the cash flow available for their owners (Suranta et al , 2020). Therefore, it is a stimulant for companies to reduce taxes expense through tax avoidance strategies (Chen et al , 2010).…”

Do women on corporate boardrooms have an impact on tax avoidance? The mediating role of corporate social responsibility

“…Corporate tax avoidance is commonly defined as actions that reduce a firm’s taxes relative to its pre-tax accounting income (Hanlon and Heitzman, 2010). In fact, taxes have been considered a material cost for companies and minimize the cash flow available for their owners (Suranta et al , 2020). Therefore, it is a stimulant for companies to reduce taxes expense through tax avoidance strategies (Chen et al , 2010).…”

Efek Moderasi Controlled Foreign Corporation Pada Pengaruh Intensitas Modal, Profitabilitas, dan Koneksi Politik Terhadap Penghindaran Pajak

“…Upaya penghindaran pajak dengan praktik Controlled Foreign Corporation (CFC) dimana dengan melakukan penundaan pengakuan pendapatan dari modal yang berasal dari negara lain (lazimnya di negara tax haven) supaya tidak dibebankan pajak di dalam negeri (Rahayu, 2017). Skema perencanaan pajak dengan CFC dipraktikkan melalui pendirian perusahaan anak di di negara lain dimana Wajib Pajak Dalam Negeri (WPDN) se-bagai pemegang saham mayoritas (Suranta et al, 2020). Semakin tinggi kepemilikan institusi luar negeri maka akan memoderasi hubungan antara capital intensity dengan penghindaran pajak.…”