Does Political Connection, Executive Character, and Audit Quality Affect the Tax Avoidance Practice? Evidence in Indonesia

Abstract

This study aim to find the empirical evidence of the effect of political connection, executive characters, and audit quality on tax avoidance practice in Indonesia. This research uses annual reports of the manufacturing companies that are listed in Indonesian Stock Exchange (IDX) period 2013 -2017. Using purposive sampling, this study obtained 51 companies that fulfill the criteria of 165 companies as total population, so the total observation for 5 years is 255 samples. The data was examined using multiple regression analyses with data panel. Tax avoidance practice in this research is proxied by Cash ETR. The results of this study indicate that variable political connection has significant positive effect on tax avoidance, which means that the average company uses its political connections to lower tax payments. Variable executive characters have no significant effect on tax avoidance, which means that the characters of executive not yet able to become a standard for determining tax avoidance practice. Variable audit quality indicated no significant effect on tax avoidance, which means the taxation office (KAP) the big four who has a good quality hasn't been able to conclude the company not doing tax avoidance practice.

Executive Compensation, Executive Character, Audit Committee, and Audit Quality on Tax Avoidance

“…This shows that Ha 4 is rejected, which means audit quality has no effect on tax avoidance. The results of this study support Amalia and Ferdiansyah (2019), Marselawati, et.al (2018), Nugraheni andPratomo (2018), andJaeni, et.al (2018) who found that there was no effect of audit quality on tax avoidance. The results of this study do not support Lestari and Nedya (2019), Tjondro and Olivia (2018), Kanagaretnam and Lobo (2016), and Dewi and Jati (2014) which prove that audit quality affects tax avoidance.…”

“…This shows that Ha 2 is accepted, which means that the executive character has positive effect on tax avoidance. The results of this study doesn't support the research of Amalia and Ferdiansyah (2019) which proves that the executive character has no effect on tax avoidance. The results of this study are consistent with Meilia and Adnan (2017), Novita (2016), and Surachman (2015) which prove the influence of executive character on tax avoidance.…”

“…al, 2010). The executive character is seen from the company's risk and executives who dare to take big risks are expected to use their character to take tax avoidance actions (Amalia and Ferdiansyah, 2019).…”

“…Dewi and Jati (2014) and Lestari and Nedya (2019) prove that audit quality has a positive effect on tax avoidance. Meanwhile, research by Amalia and Ferdiansyah (2019), Marselawati, et.al (2018), Nugraheni andPratomo (2018), andJaeni, et.al (2018) found that there was no effect of audit quality on tax evasion.…”

“…This causes the acquisition of state revenue sources not to run as it should. Various ways of evasion are carried out by taxpayers from the simplest to the most complex with the aim of minimizing the tax burden that should be paid to the state (Amalia and Ferdiansyah, 2019).…”