Board of Directors, Audit Committee, Executive Compensation and Tax Avoidance of Banking Companies in Indonesia

  • Utami Nuur Lailatul Idzniah Universitas Airlangga
  • Yustrida Bernawati Universitas Airlangga
Keywords: Good Corporate Governance, Executive Compensation, Tax Avoidance, Size of the Board of Directors, Size of the Audit Committee

Abstract

Tax avoidance is the hottest issue in the last five years. It is reinforced with the Tax Amnesty Program by the Directorate General of Taxation (DJP), which began in June 2016. Therefore, this study aims to obtain empirical evidence of the influence of good corporate governance and executive compensation on corporate tax avoidance. This study used 215 banking companies listed on the Indonesia Stock Exchange (IDX) for 2014-2018. This study using a purposive sampling method that produced 119 suitable samples. The analytical method used is multiple linear regression analysis through IBM SPSS Statistics 25 software. Computation of tax avoidance is proxied by computing of Effective Tax Rates (ETR). Good corporate governance is proxied by the size of the board of directors and the audit committee, and executive compensation is proxied by all director compensations. The size of the audit committee is a total of the audit committee in one period. The size of the board of directors is the total of the board committee in one period. This study used ROA and Leverage as a control variable. In this study, it was found that executive compensation and good corporate governance, which was proxied by the Size of the board of directors and the Size of the audit committee shown a positive effect on tax avoidance. Investors who do not want tax avoidance must pay attention to executive compensation and good corporate governance in the company. In contrast, control variables have not significant effect on tax avoidance.

References

Ardana, I. C., Yuniarwati, Dewi, S. P., & Lin, C. (2017). Factors that Influence Tax Avoidance in the Indonesia Stock Exchange. Chinese Business Review, 16 (10), 510-517. doi:10.17265/1537-1506/2017.10.005

Asmara, C. G. (2019, 02 Agustus 2019 18:43). Wacana Tax Amnesty Jilid II Timbulkan Pro & Kontra Pengusaha. Retrieved from https://www.cnbcindonesia.com/news/20190802183923-4-89509/wacana-tax-amnesty-jilid-ii-timbulkan-pro-kontra-pengusaha

Chee, S., Choi, W., & Shin, J. E. (2017). The Non-Linear Relationship Between CEO Compensation Incentives And Corporate Tax Avoidance. Journal of Applied Business Research (JABR), 33, 439. doi:10.19030/jabr.v33i3.9935

Damayanti, D. (2016). Mengapa Harus Ikut Amnesti Pajak? Retrieved from https://www.pajak.go.id/id/artikel/mengapa-harus-ikut-amnesti-pajak

Darussalam (2017). Ini Beda Tax Planning, Tax Avoidance, dan Tax Evasion. Retrieved from https://news.ddtc.co.id/perencanaan-pajak-ini-beda-tax-planning-tax-avoidance-dan-tax-evasion-9750?page_y=1733

Fajri, A., & Rusydi, M. K. (2019). Pengaruh Koneksi Politik Terhadap Penghindaran Pajak. Jurnal Ilmiah Mahasiswa FEB Universitas Brawijaya.

Focke, F., Maug, E., & Niessen-Ruenzi, A. (2017). The Impact Of Firm Prestige On Executive Compensation. Journal of Financial Economics, 123 (2), 313-336. doi:https://doi.org/10.1016/j.jfineco.2016.09.011

Gorry, A., Hassett, K. A., Hubbard, R. G., & Mathur, A. (2015). The Response of Deferred Executive Compensation to Changes in Tax Rates. Journal of Public Economics. doi:http://dx.doi.org/10.1016/j.jpubeco.2015.08.003

Handayani, R. (2019). Analysis of Corporate Social Responsibility and Good Corporate Governance to Tax Aggressiveness. International Journal of Academic Research in Accounting, Finance and Management Sciences, 9 (3), 173-184. doi:10.6007/IJARAFMS/v9-i3/6356

Hansen, V., Lopez, T. J., & Reitenga, A. (2016). The Executive Compensation Implications of the Tax Component of Earnings. Rev Quant Finan Acc. doi:10.1007/s11156-016-0561-5

Hariyanto, F., & Utomo, D. C. (2018). Pengaruh Corporate Governance Dan Kompensasi Eksekutif Terhadap Agresivitas Pajak. Diponegoro Journal of Accounting, 7, 1-14.

Hsu, P.-H., Moore, J., & Neubaum, D. (2018). Tax avoidance, Financial Experts on The Audit Committee, and Business Strategy. Journal of Business Finance & Accounting, 45(1), 1293-1321. doi:10.1111/jbfa.12352

Huang, W., Ying, T., & Shen, Y. (2018). Executive Cash Compensation And Tax Aggressiveness Of Chinese Firms. Review of Quantitative Finance and Accounting, 51. doi:10.1007/s11156-018-0700-2

Huda, R. (2016). Perdebatan di Seputar Tax Avoidance. Retrieved from https://news.ddtc.co.id/perdebatan-di-seputar-tax-avoidance-6518?page_y=25

IAI. (2018). Modul Pelatihan Pajak Terapan Brevet AB Terpadu (35 ed.). Jakarta: Ikatan Akuntan Indonesia.

Irianto, B. S., Sudibyo, Y., A., & Wafirli, A. (2017). The Influence of Profitability, Leverage, Firm Size, and Capital Intensity Towards Tax Avoidance. International Journal of Accounting and Taxation, 5 (2), 33-41. doi:10.15640/ijat.v5n2a3

Kanagaretnam, K., Lobo, G. J., & Whalen, D. J. (2007). Does Good Corporate Governance Reduce Information Asymmetry Around Quarterly Earnings Announcements? Journal of Accounting and Public Policy, 26 (4), 497-522. doi:https://doi.org/10.1016/j.jaccpubpol.2007.05.003

Kontan (2020). Dirjen Pajak angkat bicara soal kerugian Rp 68,7 triliun dari penghindaran pajak. Retrieved from https://nasional.kontan.co.id/news/dirjen-pajak-angkat-bicara-soal-kerugian-rp-687-triliun-dari-penghindaran-pajak

Kovermann, J., & Velte, P. (2019). The Impact Of Corporate Governance On Corporate Tax Avoidance—A Literature Review. Journal of International Accounting, Auditing, and Taxation, 36, 100270. doi:https://doi.org/10.1016/j.intaccaudtax.2019.100270

Kusuma, H. (2014). Kasus Pajak BCA Gerbang KPK Selidiki Perbankan RI. Retrieved from http://www.google.com/amp/s/economy.okezone.com/amp/201404/25/457/975953/kasus-pajak-bca-gerbang-kpk-selidiki-perbankan-ri

Manurung, J. T. P. (2020). Praktik Penghindaran Pajak di Indonesia. Retrieved from http://pajak.go.id/id/artikel/praktik-penghindaran-pajak-di-indonesia

Mohd Suffian, M. T., Shamsudin, S., Mohd-Sanusi, Z., & Hermawan, A. A. (2017). Malaysian Code Of Corporate Governance And Tax Compliance: Evidence From Malaysia. Management and Accounting Review (MAR), 16, 157. doi:10.24191/mar.v16i2.665

Mukarromah, A. (2016). Dirjen Pajak: Fokus Amnesti Pajak Bukan Hanya Uang Tebusan. Retrieved from https://news.ddtc.co.id/dirjen-pajak-fokus-amnesti-pajak-bukan-hanya-uang-tebusan-7683?page_y=0

Mukarromah, A. (2019). Tax Havens, Mesin Global Pelanggaran HAM Internasional. Retrieved from https://news.ddtc.co.id/tax-havens-mesin-global-pelanggaran-ham-internasional-15044

Nahumury, J., Utama, IWW,& Suryaningrum, D.H. (2018). The Compliance of Motor Vehicle Taxpayers: An Experimental Research. Journal of Accounting and Strategic Finance, 1 (02), 163-176. DOI:https://doi.org/10.33005/jasf.v1i2.44

Odoemela, U., Ironkwe, U. I., & Nwaiwu, J. N. (2016). Corporate Governance Mechanism And Tax Planning In Nigeria. International Journal of Advanced Academic Research, 2(9), 45-59.

Omolaye KE & RB, J. (2017). The Role of Internal Auditing in Enhancing Good Corporate Governance Practice in an Organization. International Journal of Accounting Research, 6(1), 174. doi:10.4172/2472-114X.1000174

Panda, B., & Leepsa, N. (2017). Agency theory: Review of Theory and Evidence on Problems and Perspectives. Indian Journal of Corporate Governance, 10, 097468621770146. doi:10.1177/0974686217701467

Parker, D., Dressel, U., Chevers, D., & Zeppetella, L. (2018). Agency Theory Perspective On Public-Private-Partnerships: International Development Project. International Journal of Productivity and Performance Management, 67, 00-00. doi:10.1108/IJPPM-09-2016-0191

Prawira, I. (2017). Corporate Governance and Tax Aggressiveness, an Evidence on Manufacturing Companies in Indonesia. International Journal of Accounting and Economics Studies, 5 (2), 134-140. doi:10.14419/ijaes.v5i2.8132

Prayogo, K. H., & Darsono. (2015). Faktor-Faktor Yang Berpengaruh Terhadap Penghindaran Pajak Perusahaan. Diponegoro Journal of Accounting, 4, 1-12.

Putra, M. A., Andreas, & Nasrizal. (2018). Pengaruh Karakter Eksekutif, Kompensasi Eksekutif, Gender Diversity, Koneksi Politik, Debt To Equity Terhadap Penghindaran Pajak Dan Manajemen Laba Sebagai Variabel Intervening. Jurnal Ekonomi, 26 (4), 52-71.

Putro, R. H., Amboningtyas, D., & Gagah, E. (2018). The Effect Of Management Compensation And Good Corporate Governance On Tax Avoidance In Property And Real Estate Company By Firm Size As The Moderating Variables (Construction And Building Sub-Sector For The 2013-2017 Period). Journal of Management, 4 (4).

Rosdiana, H., & Irianto, E. S. (2011). Panduan Lengkap Tata Cara Perpajakan di Indonesia (Z. Simatur Ed. 1 ed.). Jakarta: VisiMedia.

Rosidy, D., & Nugroho, R. (2019). Pengaruh Komisaris Independen Dan Kompensasi Eksekutif Terhadap Agresivitas Pajak. Jurnal Info Artha, 3, 55-65.

Stuebs, M., & Sun, L. (2015). Corporate governance and social responsibility. International Journal of Law and Management, 57 (1), 38-52. doi:10.1108/IJLMA-04-2014-0034

Syanthi, N., Sudarma, M., & Saraswati, E. (2017). Dampak Manajemen Laba Terhadap Perencanaan Pajak Dan Persistensi Laba. EKUITAS (Jurnal Ekonomi dan Keuangan), 17, 192. doi:10.24034/j25485024.y2013.v17.i2.2248

Tempo, M. (2001). Penggelapan Atau Penghindaran Pajak.

Waluyo (2018). The Effect Of Good Corporate Governance On Tax Avoidance: Empirical Study Of The Indonesian Banking Company. The Accounting Journal of Binaniaga, 2. doi:10.33062/ajb.v2i02.92

Wikipedia. Tata Kelola Perusahaan Yang Baik. Retrieved from http://id.m.wikipedia.org/wiki/Tata_kelola_perusahaan_yang_baik

Xue, S., & Hong, Y. (2016). Earnings management, corporate governance, and expense stickiness. China Journal of Accounting Research, 9 (1), 41-58. doi:https://doi.org/10.1016/j.cjar.2015.02.001

Yanti, T. R., & Setiawan, P. E. (2019). Pengaruh Asimetri Informasi, Ukuran Perusahaan, Leverage dan Profitabilitas pada Manajemen Laba. E-Jurnal Akuntansi, 27 (1). doi:10.24843/EJA.2019.v27.i01.p26

Zakaria, J. (2012). Perjanjian Penghindaran Pajak Berganda: Serta Penerapannya di Indonesia (e-book ed.). Jakarta: PT Raja Grafindo Persada.
Published
2020-11-30
How to Cite
IdzniahU., & BernawatiY. (2020, November 30). Board of Directors, Audit Committee, Executive Compensation and Tax Avoidance of Banking Companies in Indonesia. Journal of Accounting and Strategic Finance, 3(2), 199-213. https://doi.org/https://doi.org/10.33005/jasf.v3i2.111