Tax Avoidance and Firm Performance: Empirical Evidence of Benefits and Risks of Company Tax Planning
DOI:
https://doi.org/10.22219/jaa.v7i3.34574Keywords:
Governance, Firm Performance, Financial Accounting, Tax Avoidance, Tax PlanningAbstract
Purpose: This study provides empirical evidence on how a company's efforts to avoid paying taxes through its tax planning strategy affect its performance.
Methodology/approach: This study is explanatory research and uses samples of the companies listed in the Indonesia Stock Exchange (IDX) during the period 2015 to 2022 using a purposive sampling method. The analytical method used is the regression equation.
Findings: The findings suggest that company carries out tax avoidance to streamline corporate tax payments to improve the company's financial performance. The company's actions in tax avoidance efforts have been proven to provide additional benefits for the company through the addition of cash flow.
Practical and Theoretical contribution/Originality: This research contributes to theory and practice. First, this study provides empirical evidence of the agency theory regarding the efforts of company managers to meet investors' expectations through corporate tax planning strategies to maximize company’s financial performance. Second, this study guides companies in their efforts to implement tax planning, which positively impacts company performance by increasing company profits.
Research Limitation: For further research, external factors that affect the company's financial performance can be added, such as political connections.
Downloads
References
Almaharmeh, M. I., Shehadeh, A., Alkayed, H., Aladwan, M., & Iskandrani, M. (2024). Family Ownership, Corporate Governance Quality and Tax Avoidance: Evidence from an Emerging Market—The Case of Jordan. Journal of Risk and Financial Management, 17(2), Article 2. https://doi.org/10.3390/jrfm17020086
Alstadsæter, A., Johannesen, N., Le Guern Herry, S., & Zucman, G. (2022). Tax evasion and tax avoidance. Journal of Public Economics, 206. Scopus. https://doi.org/10.1016/j.jpubeco.2021.104587
Beer, S., de Mooij, R., & Liu, L. (2020). INTERNATIONAL CORPORATE TAX AVOIDANCE: A REVIEW OF THE CHANNELS, MAGNITUDES, AND BLIND SPOTS. Journal of Economic Surveys, 34(3), 660–688. Scopus. https://doi.org/10.1111/joes.12305
Benkraiem, R., Uyar, A., Kilic, M., & Schneider, F. (2021). Ethical behavior, auditing strength, and tax evasion: A worldwide perspective. Journal of International Accounting, Auditing and Taxation, 43, 100380. https://doi.org/10.1016/j.intaccaudtax.2021.100380
Boussaidi, A., & Hamed-Sidhom, M. (2021). Board’s characteristics, ownership’s nature and corporate tax aggressiveness: New evidence from the Tunisian context. EuroMed Journal of Business, 16(4), 487–511. https://doi.org/10.1108/EMJB-04-2020-0030
Carini, C., Moretto, M., Panteghini, P. M., & Vergalli, S. (2020). Deferred taxation under default risk. Journal of Economics/ Zeitschrift Fur Nationalokonomie, 129(1), 33–48. Scopus. https://doi.org/10.1007/s00712-019-00671-x
Duhoon, A., & Singh, M. (2023). Corporate tax avoidance: A systematic literature review and future research directions. LBS Journal of Management & Research, 21(2), 197–217. https://doi.org/10.1108/lbsjmr-12-2022-0082
Dyreng, S. D., Hoopes, J. L., & Wilde, J. H. (2016). Public Pressure and Corporate Tax Behavior. Journal of Accounting Research, 54(1), 147–186. https://doi.org/10.1111/1475-679X.12101
Fan, H., & Chen, L. (2022). Political connections, business strategy and tax aggressiveness: Evidence from China. China Accounting and Finance Review. https://doi.org/10.1108/cafr-07-2022-0086
Garg, M., Khedmati, M., Meng, F., & Thoradeniya, P. (2022). Tax avoidance and stock price crash risk: Mitigating role of managerial ability. International Journal of Managerial Finance, 18(1), 1–27. Scopus. https://doi.org/10.1108/IJMF-03-2020-0103
HAMZA, T., & ZAATIR, E. (2020). Does corporate tax aggressiveness explain future stock price crash? Empirical evidence from France. Journal of Financial Reporting and Accounting, 19(1), 55–76. Scopus. https://doi.org/10.1108/JFRA-01-2020-0018
Jin, X. (2021). Corporate tax aggressiveness and capital structure decisions: Evidence from China. International Review of Economics and Finance, 75(April), 94–111. https://doi.org/10.1016/j.iref.2021.04.008
Khan, N., Abraham, O. O., Alex, A., Eluyela, D. F., & Odianonsen, I. F. (2022). Corporate governance, tax avoidance, and corporate social responsibility: Evidence of emerging market of Nigeria and frontier market of Pakistan. Cogent Economics and Finance, 10(1). https://doi.org/10.1080/23322039.2022.2080898
Khuong, N. V., Liem, N. T., Thu, P. A., & Khanh, T. H. T. (2020). Does corporate tax avoidance explain firm performance? Evidence from an emerging economy. Cogent Business and Management, 7(1). https://doi.org/10.1080/23311975.2020.1780101
Kimea, A. J., Mkhize, M., & Maama, H. (2023). The Sociocultural and Institutional factors influencing Tax Avoidance in sub-Sahara Africa. Cogent Business & Management, 10(1), 2186744. https://doi.org/10.1080/23311975.2023.2186744
Le, V. H., Vu, T. A. T., & Nguyen, M. H. (2022). Tax Planning and Firm Value: The Case of Companies With Different State Ownership in Vietnam. Journal of Eastern European and Central Asian Research, 9(2), 333–343. https://doi.org/10.15549/jeecar.9i2.700
Mulamula, H. G., Zakaria, Z., & Mohamad, Z. Z. (2023). Tax Planning, Firm Performance and the Moderated role of Dividend Policy: Evidence from East African Countries. WSEAS Transactions on Business and Economics, 20, 1783–1801. Scopus. https://doi.org/10.37394/23207.2023.20.157
Nebie, M., & Cheng, M. C. (2023). Corporate tax avoidance and firm value: Evidence from Taiwan. Cogent Business and Management, 10(3). https://doi.org/10.1080/23311975.2023.2282218
Ouyang, C., Xiong, J., & Huang, K. (2020). Do multiple large shareholders affect tax avoidance? Evidence from China. International Review of Economics and Finance, 67(December 2019), 207–224. https://doi.org/10.1016/j.iref.2019.12.009
Sánchez-Ballesta, J. P., & Yagüe, J. (2024). Tax avoidance and debt maturity in SMEs. Journal of International Financial Management & Accounting, 35(2), 429–464. https://doi.org/10.1111/jifm.12201
Shen, Z., Zhang, R., & Li, P. (2024). Local government debt and corporate tax avoidance: Evidence from China. International Review of Economics & Finance, 93, 985–1000. https://doi.org/10.1016/j.iref.2024.03.069
Tang, T. Y. H. (2020). A review of tax avoidance in China. China Journal of Accounting Research, 13(4), 327–338. https://doi.org/10.1016/j.cjar.2020.10.001
Wahab, N. A., Mustapha, M. Z., & Rahin, N. M. (2022). CSR and Tax Avoidance: Are They Related? A Perspective of Neo-Institutional Theory in Emerging Economy Malaysia. Journal of Asia-Pacific Business, 23(4), 360–384. https://doi.org/10.1080/10599231.2022.2145628
Wang, C., Wilson, R. J., Zhang, S., & Zou, H. (2022). Political costs and corporate tax avoidance: Evidence from sin firms. Journal of Accounting and Public Policy, 41(1), 106861. https://doi.org/10.1016/j.jaccpubpol.2021.106861
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Prinintha Nanda Soemarsono, Bani Alkausar, Wahyu Firmandani, Yanuar Nugroho, Heru Tjaraka
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
Jurnal Akademi Akuntansi is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
Jurnal Akademi Akuntansi dilisensikan di bawah lisensi Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International.
Penulis yang menerbitkan artikel di jurnal ini menyetujui ketentuan berikut:
- Penulis mempertahankan hak cipta dan memberikan hak jurnal atas publikasi pertama dengan karya yang secara serentak dilisensikan di bawah Lisensi Pengaitan Creative Commons yang memungkinkan orang lain untuk berbagi karya dengan pengakuan atas karya penulis dan publikasi awal dalam jurnal ini.
- Penulis dapat masuk ke dalam pengaturan kontrak tambahan yang terpisah untuk distribusi non-eksklusif versi karya jurnal yang diterbitkan (misalnya, mempostingnya ke repositori institusional atau mempublikasikannya dalam sebuah buku), dengan pengakuan publikasi awalnya di jurnal ini.
- Penulis diizinkan dan didorong untuk memposting pekerjaan mereka secara online (misalnya, di repositori institusional atau di situs web mereka) sebelum dan selama proses pengajuan, karena dapat mengarah pada pertukaran produktif, serta kutipan pekerjaan sebelumnya dan yang lebih besar (Lihat Pengaruh Akses Terbuka).