Firms` Participation in Tax Amnesty Program Engaged in Financial Reporting Manipulation: An Empirical Evidence from Listed Companies in Indonesia

Authors

  • Gatot Soepriyanto Accounting & Finance Department, Bina Nusantara University
  • Yanto Indra Master of Accounting Program, Bina Nusantara University
  • Olivia The Accounting & Finance Program, Bina Nusantara University
  • Arfian Zudana Victoria University of Wellington, New Zealand

DOI:

https://doi.org/10.21512/tw.v20i2.5616

Keywords:

Tax amnesty, corporate tax aggressiveness, financial reporting manipulation

Abstract

The research investigated the relation between firms participated in tax amnesty programs and their tendency to manipulate financial statements. The research explored some unique research settings during Indonesia’s tax amnesty period in 2016-2017. To examine the association, the researchers employed Beneish’s M-Score model to categorize the firm’s tendency to manipulate its financial statements. As the test variable, it classified the firm’s participation in the tax amnesty program with a dummy variable, 1 if the firm participated, and 0 otherwise. To control the variations in financial statements manipulation, it also included firm size, leverage, and profitability in our empirical model. Based on the sample of 796 firm-year observations in the Indonesian Stock Exchange (IDX) from the 2012-2017 period, it is found some evidence that firms participate in tax amnesty programs do not engage in financial statements manipulation. Further analysis of the corporate tax avoidance measures shows that those firms do not engage in tax avoidance activities either. The results suggest that firms participate in the tax amnesty programs are not necessary ‘bad firms’, and they just participate as a ‘symbolic’ gesture to get some indirect benefits of the program.

Dimensions

Plum Analytics

References

Beneish, M. D. (1999). The detection of earnings manipulation. Financial Analysts Journal, 55(5), 24-36.

Buckwalter, N. D., Sharp, N. Y., Wilde, J. H., Wood, D. A. (2014). Are state tax amnesty programs associated with financial reporting irregularities? Public Finance Review, 42(6), 774-799. https://doi.org/10.1177/1091142113499397.

Dalby, D., & Wilson-Chapman, A. (2019). Panama papers helps recover more than $1,2 billion around the world. Retrieved from https://www.icij.org/investigations/panama-papers/panama-papers-helps-recover-more-than-1-2-billion-around-the-world/.

Frank, M. M., Lynch, L. J., & Rego, S. O. (2009). Tax reporting aggressiveness and its relation to aggressive financial reporting. The Accounting Review, 84(2), 467- 496.

Kamila, P. A. (2014). Analisis hubungan agresivitas pelaporan keuangan dan agresivitas pajak. Finance and Banking Journal, 16(2), 228-245.

Ko, J. K., Choi, E. H., & Kim, W. Y. (2012). The relation between aggressive financial reporting and aggressive tax reporting: Korean evidence. Korean Accounting Journal, 21(3), 95-130.

Lennox, C., Lisowsky, P., & Pittmen, J. (2013). Tax aggressiveness and accounting fraud. Journal of Accounting Research, 51(4), 739-778.

Mukarromah, A. (2016). Tax amnesty sebagai awal reformasi pajak. Inside Tax Magazine, 37, 1-69.

Mustami, A. A., & Caturini, R. (2017). Ada 956.000 WP yang ikut tax amnesty. Retrieved on November 11th 2018 from http://www. nasional.kontan.co.id.

Muttaqin, Z., (2013). Tax Amnesty di Indonesia. Bandung: Refika Aditama

Onuma, H., (2013). Tax Reporting Aggressiveness, Financial Reporting Aggressiveness, and Multinational Corporate Development - Evidence from Japan. SSRN Electronic Journal, 1-31. doi: 10.2139/ssrn.2231803.

Republik Indonesia. (2016). Undang-Undang Republik Indonesia Nomor 11 Tahun 2016 tentang Pengampunan Pajak (Lembaran Negara Republik Indonesia Tahun 2016 Nomor 131, Tambahan Lembaran Negara Republik Indonesia Nomor 5899). Jakarta: Sekretariat Negara.

Setyo, A. (2016). Google nunggak pajak lebih dari Rp 5 triliun di Indonesia. Retrieved on November 11th, 2018 from http://www.liputan6.com.

Downloads

Published

2019-10-17
Abstract 1213  .
PDF downloaded 242  .