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Determinants of Tax Avoidance in Indonesia: Moderating Role Political Connections

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  • Aristiyaningrum, Umi Laila
  • , Falikhatun

Abstract

This research aims to provide empirical evidence regarding thin capitalisation, transfer pricing, and tax avoidance, with political connections serving as moderating variables. The research employs a purposive sampling technique, resulting in a sample of 31 mining companies listed on the Indonesia Stock Exchange from 2013 to 2022. The technique used for hypothesis testing is panel data analysis through the Ordinary Least Squares (OLS) approach. The results of this research indicate that thin capitalisation and transfer pricing have a significant effect on tax avoidance. Additionally, this research reveals that the role of political connections can strengthen the impact of transfer pricing on tax avoidance but does not demonstrate that political connections can reinforce the effect of thin capitalisation on tax avoidance. The findings of this research are expected to serve as a basis for government considerations in establishing tax-related regulations. This study recommends that future research utilise different research subjects for comparison, add other independent variables outside the current model that may influence tax avoidance, and apply alternative tax avoidance measures, such as book-tax differences and tax shelters.

Suggested Citation

  • Aristiyaningrum, Umi Laila & , Falikhatun, 2024. "Determinants of Tax Avoidance in Indonesia: Moderating Role Political Connections," OSF Preprints ykfph, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:ykfph
    DOI: 10.31219/osf.io/ykfph
    as

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    References listed on IDEAS

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    1. Hanlon, Michelle & Heitzman, Shane, 2010. "A review of tax research," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 127-178, December.
    2. Wei Huang & Tingting Ying & Yun Shen, 2018. "Executive cash compensation and tax aggressiveness of Chinese firms," Review of Quantitative Finance and Accounting, Springer, vol. 51(4), pages 1151-1180, November.
    3. Hana Ajili & Hichem Khlif, 2020. "Political connections, joint audit and tax avoidance: evidence from Islamic banking industry," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 27(1), pages 155-171, January.
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