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Contoh Artikel Akrual 2
p-ISSN: 2085-9643
e-ISSN: 2502-6380 Influence Of Thin Capitalization…
Prastiwi&Ratnasari, Thehttp://journal.unesa.ac.id/index.php/aj
Dewi Prastiwi
Universitas Negeri Surabaya
dewiprastiwi@unesa.ac.id
Renni Ratnasari
Universitas Negeri Surabaya
renniratnasari.28@gmail.com
ABSTRACT
Received: August, 2018
This study aims to analyze the effect of thin capitalization and executives’
characteristics based on tax avoidance. The sample consists of 38 manufacturing
companies listed on the Indonesia Stock Exchange in 2011-2015 and they will be
Reviewed: April, 2019 determined by several criteria. The results of multiple regression analysis shows
that the thin capitalization and executives’ characteristics positively affect tax
avoidance. These results are consistent with the view that companies tend to
Accepted: April, 2019 increase interest of their debt (thin capitalization) to minimize the tax burden and
the executives’ characteristics has an important role in the action.
How to cite: Prastiwi, D & Ratnasari, R. (2019). The Influence Of Thin Capitalization And The Executives’
Characteristics Toward Tax Avoidance By Manufactures Registered On ISE In 2011-2015. Akrual:
Jurnal Akuntansi. 10 (2): 119-134. doi: http://dx.doi.org/10.26740/jaj.v10n2.p119-134
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AKRUAL: Jurnal Akuntansi, volume 10, issue 2, April 2019 (119-134)
Journalist) containing 11.5 million investigation eroded due to the practice of profit shifting.
results of 214,000 multinational companies International tax systems and differences in tax
including shareholders and company directors. It rates have caused the tax transfer scheme to
reveals the involvement of world important increase. For example, attempt to exploit the
people by conducting offshore company business weaknesses of Double Taxation Agreement
agreements in order to hide their assets (DTA) to minimize tax burden, manipulate
(Sudiarta, 2016). transfer pricing, thin capitalization, etc. (Arifin,
In term of Panama Papers, ICIJ has 2014).
previously released similar documents such as One of the biggest losses in tax revenue is
Swiss Leaks (2015) concerning Swiss HSBC due to tax reduction on high debt level, driving
Bank case which allegedly helped its customers many developed countries to adopt thin
in 203 countries to avoid tax payment capilatization rules in their attempt to protect
obligations with an aggressive tax reduction their state's tax base. Thin capitalization is the
scheme in their country of origin, especially in practice of tax avoidance through altering the
Europe with total value of US$ 119 billion. debt structure to be larger than capital. This
According to Swiss Leaks data, Indonesia ranked practice arises as a result of a tax regulation
95th country involved in the tax evasion case stating the difference between the treatment to
with value of US $ 134.1 million (Deddy, 2015). interest as a return on debt and dividend as a
Table 1. 91-100 Ranked Countries in Swiss return on return on stock investment. It is a
Leaks Case (in USD millions)
condition that a multinational company
Rank Country Value
91 Palestine 148.9 especially having a special relationship will
92 Madagascar 146.3 practice thin capitalization by increasing the
93 Peru 141.2
amount of debt financing with high tax rates to
94 Mauritius 141.0
95 Indonesia 134.1 gain benefit from the interest reduction on the
96 Sudan 131.0 basis of corporate tax imposition.
97 Hungary 122.5
98 Latvia 121.8 Government efforts to prevent this
99 Chad 120.7 practice are issued on Article 18 paragraph (1) of
100 Tanzania 114.0
Income Tax Law, which gives authority to the
Data Source: Projects ICIJ, 2015 (processed by
authors) Minister of Finance in determining the amount
of ratio between debt and company capital for
Based on the number of customers about tax calculation purposes. However, it has a lack
100 customers recorded in the Swiss Leaks case of clarity in the determined comparative
(ICIJ, 2015), Indonesia ranked 74th. It can magnitude, causing the postponement of the
illustrate that state tax revenue continues to be regulation. In 2015, the government issued
120 Copyright @ 2019 AKRUAL: Jurnal Akuntansi
Prastiwi&Ratnasari, The Influence Of Thin Capitalization…
Regulation of Minister of Finance Number is to place trustworthy people with the expertise
169/PMK.010/2015 as a follow-up to the to observe and create the scheme according to
prevention of thin capitalization practice. the executives’ expectation (Dyreng et al.,
Taylor and Richardson (2012) analyze 2010). Budiman and Setiyono (2013) argue the
thin capitalization, multinationality and tax more the corporate executives possess any traits
havens as independent variables in the scheme of of risk takers, the higher the level of avoidance
international tax avoidance practices. The result of the tax. Therefore, researchers want to test on
proves that thin capitalization significantly the executives’ characteristics whether it has a
influences tax avoidance. Thin capitalization positive effect on tax avoidance.
uses countries with high tax rates to obtain tax Based on the phenomenon described
incentives from the interest, while low tax rates above, the research tends to combine previous
are often used as fund by multinational studes’ variables (Taylor and Richardson, 2012;
companies by utilizing tax haven. Thin Ismi and Linda, 2016; Butje et al., 2014;
capitalization is a major trigger in multinational Budiman et al., 2013; Dyreng et al., 2010). Tax
corporations' tax evasion attempts. However, a avoidance is proxied by the composite result of
study conducted by Ismi dan Linda (2016) states Book Tax Difference (BTD), abnormal BTD and
that although many companies do thin Tax Shelter (Taylor & Richardson, 2012; Hanlon
capitalization, the results do not show any & Heitzman, 2010; Desai et al., 2006).
influence on tax avoidance. Hence, by this This study employs all manufacturers
exposure the researchers want to retest the listed on the IDX for the period 2011-2015 as its
relationship between thin capitalization and tax population. The population selection refers to the
avoidance. 2014 Bank Indonesia report, informing that the
In addition, the researchers also add an manufacturing sector ranked second largest
independent variable of executives’ recipient of foreign debt after the financial sector
characteristics because the decision to implement and contributed 30% to the Gross Domestic
thin capitalization depends on them. The Product (GDP). Meanwhile, the study chooses
statement that company executives have an the period of 2011 until 2015 because in that
important role in determining the tax avoidance period tax revenue underwent a reduction. Based
scheme executed by the company is supported on the background and elaboration of the results
by a research conducted by Dyreng et al. (2010) of previous studies, the authors tends to examine
and Budiman & Setiyono (2013). A company the effect of thin capitalization and executives’
executive’s role has not only an abillity to add characteristics on tax avoidance behaviors.
value to the company but also a tendency to
support tax avoidance. One of the ways they do
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AKRUAL: Jurnal Akuntansi, volume 10, issue 2, April 2019 (119-134)
greater amount of income deviation would be Tax avoidance does not mean that you are
directly proportional to the greater risk a completely free from costs. Taxpayers are still
company will face. How big or small the risk is taxed with several costs such as the cost of time
would indicate the executives’ traits are included and energy sacrificed to avoid the tax, and also,
either in the category of risk taker or risk averse there are a number of risks will be borne for the
(Budiman et al.,2013). disclosure of tax evasion. These would damage
Tax Avoidance the reputation—the company can loose it at
State revenue from the tax sector is the biggest severe, and long-term business continuity
source for State Budget (APBN), compared to (Ngadiman and Puspitasari, 2014).
other revenue sources such as non-tax revenues The Committee of Fiscal Affairs from
and grants. In Indonesia, taxation adheres to self EOCD in Suandy (2016:8) states there are three
assessment tax collection system, whereby each traits of tax avoidance, which are:
of taxpayers has an authority to calculate, pay 1) There is an artificial element, in which
and report their own taxes. Therefore, honesty various kinds of rules are made as if they
and taxpayer compliance in completing their exist yet they do not, and it happens because
obligations are highly needed. However, most there is no any tax rule stipulating.
taxpayers have desire to minimize tax obligation 2) The use of loopholes from the Law by
in various ways, either in a way that still fulfills stipulating legal provisions in order to
the provisions of taxation (lawful) and ways that achieving certain objectives, which is not the
clearly violate tax regulations (unlawful). actual purpose intended by the legislator.
Taxpayers' attempts of minimizing tax 3) Utilizing consultant service to perform tax
obligations but still following taxation provisions evasion by means or methods that meet the
are considered tax avoidance (Suandy, 2016:8). requirements of taxpayers.
Tax avoidance is an effort made to reduce There are some of means executed by
taxes, yet the doer still obeys tax regulations companies due to tax avoidance, as follows:
such as by utilizing exception and tax deduction 1. Transferring the subject and/or tax object to a
that are not prohibited, or by delaying taxes country that has tax or tax relief facility or by
through all transactions not regulated in the tax selecting a substantive tax planning.
regulations (Budiman and Setiyono 2013). Jacob 2. Strengthening the economic substance of a
(2014) also defines tax avoidance as an transaction through formal tax planning that
intentional act by reducing tax liability from the can provide the lowest tax expense.
amount that should be paid to the tax authority 3. Utilizing the provisions of anti-tax avoidance
through efficient planning by taking advantage over transfer pricing, thin capitalization,
of loopholes within tax provisions. treaty shopping and controlled foreign
124 Copyright @ 2019 AKRUAL: Jurnal Akuntansi
Prastiwi&Ratnasari, The Influence Of Thin Capitalization…
companies listed on IDX Fact Book since 1. Book Tax Difference (BTD)
January 2016. The sampling method used was It is the difference between reported income
purposive sampling. Pusposive sampling is a before tax (commercial income) and taxable
method by taking samples from the population income (fiscal profit) of company i in year t
based on certain criteria (Hartono, 2013:61). The divided by total asset belonging to company t-1.
research sample has been selected in accordance BTD measurement refers Hanlon and Heitzman
with the following criteria: research (2010), formulated as follows:
1. The company is registered on IDX in 2011- 𝑃𝑟𝑒𝑡𝑎𝑥 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒𝑖𝑡 − 𝑇𝑎𝑥 𝐼𝑛𝑐𝑜𝑚𝑒𝑖𝑡
𝐵𝑇𝐷 =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑖,𝑡−1
2015.
2. The company publishes complete audited 2. Abnormal Book-Tax Differences
financial statements during the study period. Abnormal book-tax differences refer to
3. The company has a pre-tax amount above 0 measurements in Desai and Dharmapala (2006),
4. The company has no fiscal loss. It causes the differences on total accrual. The residual value
company not to be taxed since taxable profit obtained from the regression result would be
is used to reduce the amount of fiscal loss in used as a proxy to measure tax avoidance.
5. The company has positive effective tax rate. 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝑓𝑟𝑜𝑚 𝐵𝑇𝐷⁄𝑇𝐴𝑖𝑡 = 𝛽𝑇𝐴𝑖𝑡 + 𝛽μ 𝑖 + 𝑒𝑖𝑡
comply with the provisions of taxation Tax sheltering is a tax planning designed to
regulations. Tax avoidance (TAVO) is measured avoid taxes without any economic risk or loss. It
by using a composite of Book Tax Difference could be obtained from the sum of μi and εi,t, the
(BTD), Abnormal BTD and Tax Shelter (Taylor results of the abnormal equation regression of
& Richardson, 2012; Hanlon dan Heitzman, BTD, refering to the measurements of Desai and
the level of corporate tax avoidance, and CMTA company interest in the t-period
value of each company would emerge from the The ratio of MAD (maximum amount debt) is
average of the total percentile rank. The higher calculated according to the equation of thin
the CMTA value is, the higher the indication of capitalization. A company whose MAD ratio
(BTD), Abnormal BTD, and Tax Sherltering, meaning the these two independent variables
and symbolized by TAVO, has a mean value of influence tax avoidance (TAVO).
0.5238 or 52%. It means that the average level of The Discussion of the Result
tax avoidance is 52% of the total sample. The The Influence of Thin Capitalization to Tax
minimum value of TAVO is 0.0230 or 2% by Avoidance
Jembo Cable Company Tbk., in 2012, and the Regarding to the results of hypothesis testing on
maximum value of TAVO is 1,000 or 100% by Table 4.2, the testing of thin capitalization by
Unilever Indonesia Tbk., in 2015. using the MAD (maximum amount debt) ratio to
Significance Test of Parameter of Individual tax avoidance has a regression coefficient of
Data (Statistical Test t) 0.107 and a significance probability value of
Statistical test t is conducted to find out how 0,047 or less than the specified level of 0.05 or
much significance level or influence of each 5%. The coefficient indicates the existence of
independent variable are in explaining the positive relationship between thin capitalization
variation of the dependent variables (Ghozali, and tax avoidance which means that the higher
2013:97). The level of significance employed in the MAD ratio is, the higher tax avoidance
this t-test is 5% (0.05), meaning the risk of would be, or vice versa. The result also depicts
mistakes in decision making is 5%. The the practice of thin capitalization by companies
significance test of individual data parameter influences tax evasion. To sum up, the first
results as follows: hypothesis that states thin capitalization has a
Table 3. The Result of Significance Test of positive effect on tax avoidance can be accepted.
Parameter of Individual Data In addition, the result points that tax
Model Unstandardized Standardized T Sig
Coefficients Coefficients . avoidance practice through making debt
B Std.
Error structure much larger than capital (thin
(Constant) .474 .044 10.695 .000
THIN .107 .056 .130 1.917 .047 capitalization) is one of the attempts to minimize
CRISK 1.453 .277 .357 5.251 .000 the corporate tax burden. The emergence of thin
a. Dependent Variable: TAVO
capitalization is due to the existence of rules in
Source: data processed by SPSS (Coefficients)
taxation provisions that gives different treatment
On table 4.2, it indicates thin to interest and dividend as a form of return on
capitalization (THIN) has a significance share investment in the company. Payment of
probability value of 0.047 and the executives’ interest on loans is a deductible expense to
characteristics (CRISK) exhibits the value of calculate the amount of taxable income, while
0.000. Both of them have a significance dividend payments are costs that cannot be
probability value which is less than the diminished.
significance level determined of 0.05 or 5%,
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AKRUAL: Jurnal Akuntansi, volume 10, issue 2, April 2019 (119-134)
The theory supporting the first hypothesis d. Financial expenses in finance leases.
is the theory of planned behavior, describes that e. The cost of compensation for the guarantee in
the company has certain intentions to maximize returning the debt.
its profits by minimizing tax burden. Due to the f. The difference of an exchange rate obtained
effort, the company commits thin capitalization from loans in foreign currencies.
by increasing the interest loans obtained from The ratio value of debt with capital owned
shareholders. Companies that receive all interest- by the company is not permitted to exceed the
bearing loans will be burdened with deductible stipulated limit. If the magnitude of the ratio
interest costs in calculating the taxable income. exceeds the specified limit, the costs on the loan
The smaller the taxable income is, the smaller may only be charged according to safe harbor
the tax burden would be. limit. The table below would exhibit the limit of
Thin capitalization generally requires ratio between debt and equity or debt equity ratio
partners or affiliation as its debt financing effort (DER) in several countries:
in countries with higher tax rates in order to Table 4. The Provisions of Thin Capitalization
obtain greater reduction in the basis of Rules in Some Countries
Requirement of
Country Limit of Ratio
imposition. The steps the government takes in Ownership
Japan DER 3:1 Ownership < 50%
handling the practice of thin capitalization is the Australia DER 3:1 Ownership < 15%
issuance of the Decree of Minister of Finance Canada DER 2:1 Ownership > 25%
United States
Number 1002/KMK.04/1984 concerning the of America DER 1:1 Ownership 50%
magnitude of ratio of debt to capital, which has Source: Ning Rahayu (2010)
However, Ismi andLinda (2016) in their study Ricky Putra Globalindo Tbk., has CRISK
argues that the interest-based debt restrictions value of 0.0046 with TAVO of 0.3146 which
imposed by the company do not affect the means risk averse traits dominantly exist, to take
company actions due to the lack of tax less tax avoidance actions. Whereas Mayora
processing practices with optimized company Indah Tbk., possesses the largest CRISK value
debt ownership. of 0.4880 with a TAVO of 0.9890 indicating that
The Influence of Executives’ Characteristics the executives’ characteristics is considered risk
to Tax Avoidance takers by highly doing tax avoidance actions.
On Table 4.2, the testing of the executives’ Moreover, corporate executives have
characteristics by using corporate risk to tax influence in making risky decisions to obtain
avoidance has a regression coefficient of 1.453 profits for the company. One of the ways used to
and a significance probability value of 0.000 or maximize company profits is to minimize the tax
smaller than the determined significance level burden or to divert income through tax
which is 0.05 or 5 %. The regression coefficient avoidance. Company executives place trustees
shows the existence of a positive relationship whose expertises are to observe and create tax
with tax avoidance which means that the greater avoidance schemes according to what executives
the risk of the company is, the greater tax expect. Shortly, the executives do not directly
avoidance would be, or vice versa. The results of take part in these actions.
testing indicates that the characteristics of the Based on the description above, it can be
executives influence tax avoidance. It can be concluded that the results of the research
concluded if the second hypothesis is accepted. denoting that the executives’ characteristics
Additionally, the increase or decrease in influence tax avoidance. It supports the research
corporate risk describes the executives’ of Dyreng et al. (2010) which argues that the
characteristics. The high value of corporate risk executives’ characteristics has a role in
(CRISK) exhibits the risk taker as traits which supporting tax avoidance actions, and Budiman
has a large tendency to avoid tax compared to et al. (2012) notes that if the company executives
the value of corporate risk (CRISK), as are risk takers, the higher rate of avoidance
evidenced in the following data: would be taken.
Table 5. The Minimum and Maksimum values
of Corporate Risk (CRISK) & the Value of CONCLUSIONS
TAVO 1. Thin capitalization has a positive effect on tax
CompanyName CRISK TAVO
Ricky Putra Globalindo Tbk. 0,0046 0.31467 avoidance, in which the higher the practice
Mayora Indah Tbk. 0,4880 0.98900 thin capitalization is conducted, the higher tax
Source: data processed by authors.
avoidance actions would be executed. It
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