Determinants of Tax Avoidance in Five Countries of Southeast Asia

Meliani Mukti, Khairanis Yulita, Alexander N.H. Pranoto

Abstract


Multinational companies are using gaps in rules to pursue tax avoidance, considering various characteristics and companies practices. Therefore, this study aimed to investigate many aspects of tax avoidance. During the 2015-2021 timeframe, 518 observations from 74 samples of non-financial companies in Indonesia, Malaysia, Philippines, Singapore, and Thailand were tested using Generalized Least Squares. Companies size, financial performance, as well as research and development intensity are significantly related to tax avoidance practices in Southeast Asian countries but the degree of leverage did not affect the tax avoidance variable. The results supported the political cost theory that there was a negative relationship between companies size and tax avoidance, as well as a positive relationship showed by financial performance factors and research and development intensity. The results stated the significance of tax authorities' role in managing the activities and performance of successful companies. In addition, the importance of monitoring the benefits of tax incentives following established regulations needs to be done to enforce compliance and control tax avoidance practices in companies.

Keywords


Company Size; Financial Performance; Leverage; Research and Development; Tax Avoidance

Full Text:

PDF

References


Armstrong, C. S., Blouin, J. L., & Larcker, D. F. (2012). The incentives for tax planning. Journal of Accounting and Economics, 53(1–2), 391–411. https://doi.org/10.1016/j.jacceco.2011.04.001.

Barbera, A., Merello, P., & Molina, R. (2020). Determinants of corporate effective tax rates: evidence from the euro area. Academia Revista Latinoamericana de Administracion, 33(3–4), 427–444. https://doi.org/10.1108/ARLA-12-2019-0238.

Belz, T., von Hagen, D., & Steffens, C. (2019). Taxes and firm size: Political cost or political power? Journal of Accounting Literature, 42, 1-28. doi:https://doi.org/10.1016/j.acclit.2018.12.001.

Bubanić, M., & Šimović, H. (2021). Determinants of the effective tax burden of companies in the Telecommunications activities in the Republic of Croatia. Zagreb International Review of Economics and Business, 24(2), 59–76. https://doi.org/10.2478/zireb-2021-0011.

Cao, J., & Cui, Y. (2017). An Alternative View on Determinants of the Effective Tax Rate: Evidence from Chinese Listed Companies. Emerging Markets Finance and Trade, 53. https://doi:10.1080/1540496X.2016.1256113.

Chun, H. M., Kang, G. I. J., Lee, S. H., & Keun Yoo, Y. (2020). Corporate tax avoidance and cost of equity capital: international evidence. Applied Economics, 52(29), 3123–3137. https://doi.org/10.1080/00036846.2019.1706716.

Dang, V. C., & Tran, X. H. (2021). The impact of financial distress on tax avoidance: An empirical analysis of the Vietnamese listed companies. Cogent Business and Management, 8(1). https://doi.org/10.1080/23311975.2021.1953678.

Desai, M.A., & Dharmapala, D. (2006). Corporate tax avoidance and high-powered incentives. Journal of Financial Economics, 79(1), 145-179. https://doi.org/10.1016/j.jfineco.2005.02.002.

Do, T.K., Lai, T.N., & Tran, T.T.C. (2020). Foreign ownership and capital structure dynamics. Finance Research Letters, 36(566), 101337. https://doi.org/10.1016/j.frl.2019.101337.

Fernández-Rodríguez, E., García-Fernández, R., & Martínez-Arias, A. (2021). Business and institutional determinants of Effective Tax Rate in emerging economies. Economic Modelling, 94, 692-702. doi:https://doi.org/10.1016/j.econmod.2020.02.011.

Frank, M.M., Lynch, L., & Rego, S. (2009). Tax reporting aggresiveness and its relation to aggressive financial reporting. The Accounting Review, 84(2), 467-496. https://doi.org/10.2308/accr.2009.84.2.467.

Gao, L., Yang, L. L., & Zhang, J. H. (2016). Corporate patents, R&D success, and tax avoidance. Review of Quantitative Finance and Accounting, 47(4), 1063–1096. https://doi.org/10.1007/s11156-015-0531-3.

Gupta, S., & Newberry, K. (1997). Determinants of the variability in corporate effective tax rates: Evidence from longitudinal data. Journal of Accounting and Public Policy, 16, 1-34.

Hoi, C. K., Wu, Q., & Zhang, H. (2013). Is Corporate Social Responsibility (CSR) Associated with Tax Avoidance? Evidence from Irresponsible CSR Activities. The accounting review, 88(6), 2025-2059. https://doi.org/10.2308/accr-50544.

Huang, D.-F., Chen, N.-Y., & Gao, K.-W. (2013). The tax burden of listed companies in China. Applied Financial Economics, 23(14), 1169–1183. https://doi.org/10.1080/09603107.2013.786163.

Jing, H., & Li, B. (2023). Research of the fiscal and tax policies of High-tech industry in Northeast China. Paper presented at the SHS Web of Conferences. https:// doi.org/10.1051/shsconf/202316303029.

Johannesen, N., Tørsløv, T., & Wier, L. (2020). Are Less Developed Countries More Exposed to Multinational Tax Avoidance? Method and Evidence from Micro-Data. World Bank Economic Review, 34(3), 790–809. https://doi.org/10.1093/wber/lhz002.

Kalbuana, N., Taqi, M., Uzliawati, L., & Ramdhani, D. (2023). CEO narcissism, corporate governance, financial distress, and company size on corporate tax avoidance. Cogent Business & Management, 10(1), 2167550. https://doi.org/10.1080/23311975.2023.2167550.

Khan, M., Srinivasan, S., & Tan, L. (2017). Institutional ownership and corporate tax avoidance: New evidence. Accounting Review, 92(2), 101–122. https://doi.org/10.2308/accr-51529.

Kim, J., & Im, C. (2017). Study on Corporate Social Responsibility (CSR): Focus on tax avoidance and financial ratio analysis. Sustainability, 9(10), 1-16. https://doi.org/10.3390/su9101710.

Laplante, S. K., Skaife, H. A., Swenson, L. A., & Wangerin, D. D. (2019). Limits of tax regulation: Evidence from strategic R&D classification and the R&D tax credit. Journal of Accounting and Public Policy, 38(2), 89–105. https://doi.org/10.1016/j.jaccpubpol.2019.02.003.

Muthitacharoen, A., & Samphantharak, K. (2020). Multinational tax avoidance and anti-avoidance enforcement: Firm-level evidence from developing countries. The Singapore Economic Review, 67(6), 1-17.

Richardson, G., & Lanis, R. (2007). Determinants of the variability in corporate effective tax rates and tax reform: Evidence from Australia. Journal of accounting and Public Policy, 26(6), 689-704. doi:https://doi.org/10.1016/j.jaccpubpol.2007.10.003.

Saragih, A.H., Ali, S., Suwardi, E., & Utomo, H. (2024). Finding the missing pieces to an optimal corporate tax savings: Information technology governance and internal information quality. International Journal of Accounting Information Systems, 52(December 2023), 100665. https://doi.org/10.1016/j.accinf.2023.100665.

Stamatopoulos, I., Hadjidema, S., & Eleftheriou, K. (2019). Explaining corporate effective tax rates: Evidence from Greece. Economic Analysis and Policy, 62, 236-254. https://doi.org/10.1016/j.eap.2019.03.004.

Stickney, C. P., & McGee, V. E. (1982). Effective corporate tax rates the effect of size, capital intensity, leverage, and other factors. Journal of Accounting and Public Policy, 1(2), 125–152. https://doi.org/10.1016/S0278-4254(82)80004-5.

Vintilă, G., Gherghina, Ş. C., & Păunescu, R. A. (2018). Study of Effective Corporate Tax Rate and Its Influential Factors: Empirical Evidence from Emerging European Markets. Emerging Markets Finance and Trade, 54(3), 571-590. doi:10.1080/1540496X.2017.1418317.

Wang, S. (1991). The relation between firm size and effective tax rates: A test of firms' political success. The Accounting Review, 66(1), 158.

Watts, R. L., & Zimmerman, J. L. (1978). Towards a positive theory of the determination of accounting standards. Accounting Review, 112-134.

Wilson, R. (2009). An examination of corporate tax shelter partcipants. The Accounting Review, 84(3), 969-999. https://doi.org/10.2308/accr.2009.84.3.969.

Yang, J. G. S., & Metallo, V. N. A. (2018). The emerging international taxation problems. International Journal of Financial Studies, 6(1), 1–11. https://doi.org/10.3390/ijfs6010006.

Yoon, S. M., Jiang, E. L., & Cui, Y. (2023). Tax policies for high-tech companies and tax avoidance in China. International Journal of Applied Economics, Finance and Accounting, 16(2), 308–318. https://doi.org/10.33094/ijaefa.v16i2.986.

Zimmerman, J. L. (1983). Taxes and firm size. Journal of Accounting and Economics, 5, 119-149. doi:https://doi.org/10.1016/0165-4101(83)90008-3.




DOI: https://doi.org/10.26905/ap.v10i1.11674

Refbacks

  • There are currently no refbacks.


 

Indexing by

 

width="150"

Garuda - Garba Rujukan Digital

 

Index of /public/site/images/septi

Index Copernicus International (ICI)

 Tools:

 

Turnitin

crossref

Mendeley

 

Supported By:

 

Universitas Merdeka Malang

 


JURNAL AKUNTANSI DAN PERPAJAKAN

Fakultas Ekonomi dan Bisnis
Universitas Merdeka Malang

Mailing Address:

Jalan Terusan Raya Dieng 62-64 Malang
East Java, Indonesia
Phone: 085855234000
Email: [email protected]

 

Copyright ©2021 University of Merdeka Malang Powered by Open Journal Systems.