Tax Audit Signals Contribute to the Diminishing of Tax Haven Beneficiary Firm Value
Abstract
The purpose of this study is to obtain an overview of the interaction of the tax havens' use and disclosure of tax audits and the impact of both on the firm value before the tax rate reduction period. The sample is Indonesia-listed firms in agriculture, basic industry and chemical, miscellaneous industry, and consumer goods sectors for 2015 – 2019. This research uses panel data and weighted least square regression. The findings indicate that using tax havens through subsidiaries is associated with increased firm value. In contrast, firms that have subsidiaries in a tax haven and disclose the result of tax audits are associated with a decrease in firm value. This research, to our knowledge, is the first research that combines the impact of tax haven utilization and tax audit disclosure on firm value in Indonesia.
Keywords: tax haven utilization, tax audit disclosure, firm value, tax haven subsidiaries, signalling theory
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References
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Grubert, H., & Mutti, J. (1991). Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making. The Review of Economics and Statistics, 73(2), 285. https://doi.org/10.2307/2109519
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Pratama, A. (2020). Corporate governance, foreign operations and transfer pricing practice: The case of Indonesian manufacturing companies. International Journal of Business and Globalisation, 24(2), 185–200. https://doi.org/10.1504/IJBG.2020.105167
Prisantama, A., & Muqodim. (2016). The Influences of the Tax System, Tax Rate, Tax Audit and Tax Discrimination on Tax Evasion by Body Taxpayer. The Indonesian Journal of Accounting Research, 19(2), 161–184. http://www.ijar-iaikapd.or.id/index.php/ijar/article/view/408/76
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Schjelderup, G. (2016). Secrecy jurisdictions. International Tax and Public Finance, 23(1), 168–189. https://doi.org/10.1007/s10797-015-9350-7
Schwab, K. (2019). The Global Competitiveness Report 2019. http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf
Shackelford, D. A., & Shevlin, T. (2001). Empirical tax research in accounting: A discussion. Journal of Accounting and Economics, 31(1–3), 389–403. https://doi.org/10.1016/S0165-4101(01)00021-0
Su, W., & Tan, D. (2018). Business Groups and Tax Havens. Journal of Business Ethics, 153(4), 1067–1081. https://doi.org/10.1007/s10551-018-3910-6
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Taylor, G., Richardson, G., & Al-Hadi, A. (2018). Uncertain tax benefits, international tax risk, and audit specialization: Evidence from US multinational firms. International Journal of Auditing, 22(2), 230–248. https://doi.org/10.1111/ijau.12117
Taylor, G., Richardson, G., & Taplin, R. (2015). Determinants of tax haven utilization: Evidence from Australian firms. Accounting and Finance, 55(2), 545–574. https://doi.org/10.1111/acfi.12064
Transparency International. (2019). Corruption Perception Index. https://www.transparency.org/en/cpi/2015/index/sgp.
Utama, C. A., & Utama, S. (2009). Stock price reactions to announcements of related party transactions. Asian Journal of Business and Accounting, 2(1–2), 1–23.
Atwood, T. J., & Lewellen, C. (2019). The Complementarity between Tax Avoidance and Manager Diversion: Evidence from Tax Haven Firms. Contemporary Accounting Research, 36(1), 259–294. https://doi.org/10.1111/1911-3846.12421
Baier, C., Göttsche, M., Hellmann, A., & Schiemann, F. (2022). Too Good To Be True: Influencing Credibility Perceptions with Signaling Reference Explicitness and Assurance Depth. Journal of Business Ethics, 178(3), 695–714. https://doi.org/10.1007/s10551-020-04719-7
Bennedsen, M., & Zeume, S. (2018). Corporate tax havens and transparency. Review of Financial Studies, 31(4), 1221–1264. https://doi.org/10.1093/rfs/hhx122
Blaufus, K., Möhlmann, A., & Schwäbe, A. N. (2019). Stock price reactions to news about corporate tax avoidance and evasion. Journal of Economic Psychology, 72, 278–292. https://doi.org/10.1016/j.joep.2019.04.007
Chan, K. H., Lo, A. W. Y., & Mo, P. L. L. (2015). An empirical analysis of the changes in tax audit focus on international transfer pricing. Journal of International Accounting, Auditing and Taxation, 24, 94–104. https://doi.org/10.1016/j.intaccaudtax.2014.12.001
Chang, L. L., Hsiao, F. D., & Tsai, Y. C. (2013). Earnings, institutional investors, tax avoidance, and firm value: Evidence from Taiwan. Journal of International Accounting, Auditing and Taxation, 22(2), 98–108. https://doi.org/10.1016/j.intaccaudtax.2013.07.001
Chari, M., & Acikgoz, S. (2016). What drives emerging economy firm acquisitions in tax havens?. Journal of Business Research, 69(2), 664–671. https://doi.org/10.1016/j.jbusres.2015.08.034
Choy, S. K., Lai, T. kei, & Ng, T. (2016). Do tax havens create firm value?. Journal of Corporate Finance, 42, 198–220. https://doi.org/10.1016/j.jcorpfin.2016.10.016
CNN Indonesia. (2020). DJP Ungkap Sebab Rasio Pajak 2019 Turun Jadi 10,7 Persen. CNN Indonesia. https://www.cnnindonesia.com/ekonomi/20200211205100-532-473761/djp-ungkap-sebab-rasio-pajak-2019-turun-jadi-107-persen
Connelly, B. L., Certo, S. T., Ireland, R. D., & Reutzel, C. R. (2011). Signaling theory: A review and assessment. Journal of Management, 37(1), 39–67. https://doi.org/10.1177/0149206310388419
Diab, A. A., Aboud, A., & Hamdy, A. (2019). The impact of related party transactions on firm value: Evidence from a developing country. Journal of Financial Reporting and Accounting, 17(3), 571–588. https://doi.org/10.1108/JFRA-08-2018-0064
Fooladi, M., & Farhadi, M. (2019). Corporate governance and detrimental related party transactions: Evidence from Malaysia. Asian Review of Accounting, 27(2), 196–227. https://doi.org/10.1108/ARA-02-2018-0029
Gravelle, J. G. (2015). Tax havens: International tax avoidance and evasion. Taxes in the United States: Developments, Analysis and Research, 4, 37–87.
Grubert, H., & Mutti, J. (1991). Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making. The Review of Economics and Statistics, 73(2), 285. https://doi.org/10.2307/2109519
Hendratama, T. D., & Barokah, Z. (2020). Related party transactions and firm value: The moderating role of corporate social responsibility reporting. China Journal of Accounting Research, 13(2), 223–236. https://doi.org/10.1016/j.cjar.2020.04.002
IDX. (2019). IDX FACT BOOK 2019. www.idx.co.id
Kim, S., Jung, H., & Na, H. (2019). Tax haven investors, firm value and investor protection. Applied Economics Letters, 26(19), 1634–1640. https://doi.org/10.1080/13504851.2019.1591584
Lo, A. W. Y., & Wong, R. M. K. (2016). Silence is golden? Evidence from disclosing related-party transactions in China. Journal of Accounting and Public Policy, 35(5), 540–564. https://doi.org/10.1016/j.jaccpubpol.2016.06.002
Masri, I., Syakhroza, A., Wardhani, R., & Samingun. (2019). The role of tax risk management in international tax avoidance practices: Evidence from Indonesia and Malaysia. International Journal of Trade and Global Markets, 12(3–4), 311–322. https://doi.org/10.1504/IJTGM.2019.101561
Mukarromah, A. (2021). Memahami Definisi dan Tujuan Pemeriksaan Pajak. News.Ddtc.Co.Id. https://news.ddtc.co.id/memahami-definisi-dan-tujuan-pemeriksaan-pajak-27844
Mukundhan, K. V., Sahasranamam, S., & Cordeiro, J. J. (2019). Corporate investments in tax havens: evidence from India. Asian Business and Management, 18(5), 360–388. https://doi.org/10.1057/s41291-019-00086-y
OECD. (2010). Countering Offshore Tax Evasion. https://www.oecd.org/ctp/harmful/42469606.pdf
Pemerintah Republik Indonesia. (2016). PMK Nomor 213 /PMK.03/ 2016. Www.Jdih.Kemenkeu.Go.Id, 10.
Pemerintah Republik Indonesia. (2019). Konferensi Pers. Kemenkeu.Go.Id. https://www.kemenkeu.go.id/media/13339/apbn-2020-bahan-final.pdf
Pemerintah Republik Indonesia. (2020). Peraturan Pemerintah Pengganti Undang-Undang Republik Indonesia Nomor 1 Tahun 2020 tentang Kebijakan Keuangan Negara dan Stabilitas Sistem Keuangan Untuk Penanganan Pandemi Covid-19 dan/atau Dalam Rangka Menghadapi Ancaman Yang Membahayakan Perekonomian N. 46.
Pratama, A. (2020). Corporate governance, foreign operations and transfer pricing practice: The case of Indonesian manufacturing companies. International Journal of Business and Globalisation, 24(2), 185–200. https://doi.org/10.1504/IJBG.2020.105167
Prisantama, A., & Muqodim. (2016). The Influences of the Tax System, Tax Rate, Tax Audit and Tax Discrimination on Tax Evasion by Body Taxpayer. The Indonesian Journal of Accounting Research, 19(2), 161–184. http://www.ijar-iaikapd.or.id/index.php/ijar/article/view/408/76
Ramli, R. R. (2020). Sri Mulyani: Tidak Boleh Ada Lagi Negara Tax Haven. Kompas.Com. https://money.kompas.com/read/2020/02/23/120100426/sri-mulyani--tidak-boleh-ada-lagi-negara-tax-haven
Republic of Indonesia. (2018). Kementerian Keuangan Republik Indonesia, Direktorat Jenderal Pajak: Kebijakan Pemeriksaan
Sari, R. C., & Baridwan, Z. (2014). Current Asset Tunneling and Firm Performance in an Emerging Market. Jurnal Akuntansi Dan Keuangan Indonesia, 11(2), 165–176. https://doi.org/10.21002/jaki.2014.09
Schjelderup, G. (2016). Secrecy jurisdictions. International Tax and Public Finance, 23(1), 168–189. https://doi.org/10.1007/s10797-015-9350-7
Schwab, K. (2019). The Global Competitiveness Report 2019. http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf
Shackelford, D. A., & Shevlin, T. (2001). Empirical tax research in accounting: A discussion. Journal of Accounting and Economics, 31(1–3), 389–403. https://doi.org/10.1016/S0165-4101(01)00021-0
Su, W., & Tan, D. (2018). Business Groups and Tax Havens. Journal of Business Ethics, 153(4), 1067–1081. https://doi.org/10.1007/s10551-018-3910-6
Tambunan, M. R. U. D. (2020). A note to transfer pricing audit performance by Indonesia’s tax administration based on tax court decision 2015-2019 on manufacturing industry. Jurnal Akuntansi & Auditing Indonesia, 24(2), 85–96. https://doi.org/10.20885/jaai.vol24.iss2.art2
Tax Justice Network. (2019). Corporate Tax Haven Index. https://corporatetaxhavenindex.org/en/
Taylor, G., Richardson, G., & Al-Hadi, A. (2018). Uncertain tax benefits, international tax risk, and audit specialization: Evidence from US multinational firms. International Journal of Auditing, 22(2), 230–248. https://doi.org/10.1111/ijau.12117
Taylor, G., Richardson, G., & Taplin, R. (2015). Determinants of tax haven utilization: Evidence from Australian firms. Accounting and Finance, 55(2), 545–574. https://doi.org/10.1111/acfi.12064
Transparency International. (2019). Corruption Perception Index. https://www.transparency.org/en/cpi/2015/index/sgp.
Utama, C. A., & Utama, S. (2009). Stock price reactions to announcements of related party transactions. Asian Journal of Business and Accounting, 2(1–2), 1–23.
Published
2022-07-27
How to Cite
TJONDRO, Elisa et al.
Tax Audit Signals Contribute to the Diminishing of Tax Haven Beneficiary Firm Value.
Jurnal Ilmiah Akuntansi dan Bisnis, [S.l.], v. 17, n. 2, p. 272-285, july 2022.
ISSN 2303-1018.
Available at: <https://ojs.unud.ac.id/index.php/jiab/article/view/80637>. Date accessed: 26 apr. 2024.
doi: https://doi.org/10.24843/JIAB.2022.v17.i02.p06.
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