Foreign Related Parties Transactions as Tax Avoidance Strategy in Indonesia: The Role of Corporate Governance

DOI

10.2991/icebess-18.2019.15How to use a DOI?

Keywords

tax avoidance, tax expenses, related party transaction, marginal tax rate, corporate governance

Abstract

This study presents tax avoidance practice through foreign related party transaction and the effect of corporate governance on the relationship between the shareholder's tax expenses and foreign related party transaction. Different from other studies that use related party transaction entirely, this study uses a foreign related party transaction. Related party transaction will be beneficial only if it is done on the company with the different tax rate. If it is done in Indonesia that has a flat income tax rate, foreign related party transaction can be used to avoid tax. Using data from 301 listed companies in Indonesia, this study finds that tax avoidance in Indonesia is undertaken by increasing foreign related party transaction. The use of foreign related party transaction can tell more about tax avoidance strategy compared to related party transaction in totally. The related party transaction to a country with a lower tax rate can be one of tax avoidance strategy in Indonesia to get a tax benefit. This study also finds that corporate governance can weaken the effect of the shareholder's tax expenses on the related party transaction meaning to lower the tax avoidance practice through the mechanism of related foreign party transaction.

Copyright

© 2019, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Nuritomo Nuritomo
AU  - Sidharta Utama
AU  - Ancella A Hermawan
PY  - 2019/04
DA  - 2019/04
TI  - Foreign Related Parties Transactions as Tax Avoidance Strategy in Indonesia: The Role of Corporate Governance
BT  - Proceedings of the International Conference of Ethics on Business, Economics, and Social Science (ICEBESS 2018)
PB  - Atlantis Press
SP  - 86
EP  - 92
SN  - 2352-5398
UR  - https://doi.org/10.2991/icebess-18.2019.15
DO  - 10.2991/icebess-18.2019.15
ID  - Nuritomo2019/04
ER  -