Earning Management or Tax Avoidance? Company Decision on Accounting and Tax Reporting Cost

DOI

10.2991/teams-19.2019.4How to use a DOI?

Keywords

debt ratio; earnings management; tax avoidance; financial reporting costs; tax reporting costs

Abstract

The significant differences between the company tax rate and the loan interest rate create incentives for companies in Indonesia to conduct trade-offs between accounting and tax reporting costs. Management always wants to give a good signal for investors regarding company financial performance. On the other hand, regarding tax reporting, management hopes that the increase in profits is not significant compared to last year, because this means paying higher taxes. This study aims to prove the effect of total debt and long-term debt on the company's management decisions regarding preference to focus on accounting or tax reporting. The research sample was manufacturing companies with observation years of 2012 - 2016 with 175 observations. The data of this study obtained from Bloomberg databases and audit reports published by the Indonesia Stock Exchange. The statistical tool used is logistic regression with the SPSS program. The results showed that there was a non-linear relationship between debt ratios and management decisions. The companies lean to focus on accounting reporting when debt ratios below a certain threshold and choose to focus on tax reporting above threshold. Regarding long term debt, we found long-term debts do not have a significant effect on preferences to focus on accounting or tax reporting cost. We also found the return on asset, and big four auditors influenced the company's decisions regarding earning management and tax avoidance.

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  - Elisa Tjondro
AU  - Agnes Ayu Permata
PY  - 2019/11
DA  - 2019/11
TI  - Earning Management or Tax Avoidance? Company Decision on Accounting and Tax Reporting Cost
BT  - Proceedings of the International Conference on Tourism, Economics, Accounting, Management, and Social Science (TEAMS 19)
PB  - Atlantis Press
SP  - 1
EP  - 9
SN  - 2352-5428
UR  - https://doi.org/10.2991/teams-19.2019.4
DO  - 10.2991/teams-19.2019.4
ID  - Tjondro2019/11
ER  -