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The Effect of Leverage, Capital Intensity and Deferred Tax
The Effect of Leverage, Capital Intensity and Deferred Tax
The Effect of Leverage, Capital Intensity and Deferred Tax
28624
Cicik Suciarti
Telkom University
Elly Suryani
Telkom University
Kurnia
Telkom University
Abstract: This research was conducted to determine the simultaneous and partial effect of Leverage,
Capital Intensity and Deferred Tax Expense on Tax Avoidance in the automotive subsector companies
listed on the Indonesia Stock Exchange (IDX) during 2012-2018. The sampling technique used was
purposive sampling. The method of data analysis uses panel data regression analysis using Eviews 10
software by conducting several stages of testing. The results of this study indicate that leverage, capital
intensity, and deferred tax expense simultaneously significantly affect tax avoidance. Capital intensity
partially has a significant effect on tax avoidance in a negative direction. Meanwhile, leverage and
deferred tax expense partially have no significant effect on tax avoidance.
minimizing the tax expense (Alfina et al., (An Empirical Study of Automotive Sub Sector
2018). Companies Listed on the Indonesia Stock
Investment decisions are also things Exchange (IDX) 2012-2018)
that can affect tax payments. Depreciation of
fixed assets is an essential part of company Literature Review and Hypothesis
costs (Ribeiro et al., 2015). Ownership of fixed Development
assets by companies can reduce the tax
payments paid due to the depreciation costs Leverage and Tax Avoidance
attached to these fixed assets. Depreciation
costs can be used by managers to minimize the Leverage is a ratio that measures how far the
taxes paid by companies. Management will use company uses debt for financing. With the debt
idle company funds to buy fixed assets as an will cause interest expense. Interest expense
investment in order to get a profit that is that arises because of the debt will be a
depreciation costs that are useful as tax deduction from the company's net profit and
deductions (Dharmadi, 2013 in Dharma and will later reduce tax. If the company is more
Noviari, 2017). relies on debt than equity for operational
Based on PSAK no. 46 tax allocation activities, then interest expense is taxes
between periods begins with the company deductible while dividends are not. Companies
having to recognize deferred tax assets and with high leverage will have low ETR
liabilities that must be disclosed on the balance (Richardson and Lanis, 2007). Therefore the
sheet. The recognition of deferred tax assets and frame of mind of leverage on tax avoidance has
liabilities is recognition of the future tax a positive effect. This opinion supports the
consequences of the cumulative effect of results of previous research conducted by
temporary differences in recognition of income Richardson and Lanis (2007).
and expenses for accounting and fiscal
purposes. In the asset-liability approach, a Hypothesis 1: Leverage has a significant
temporary difference is a difference between positive effect on Tax Avoidance
the tax base (DPP) of an asset or liability and
the carrying value of the asset or liability. The Capital Intensity and Tax Avoidance
effects of temporary changes reflected in an
increase or decrease in deferred tax assets and According to Adisamartha and Noviari (2015),
liabilities must be treated as deferred tax capital intensity is a ratio that indicates the
expenses or deferred tax income and disclosed intensity of ownership of a company's fixed
in the current year's income statement together assets compared to total assets. Capital intensity
with current tax expenses and presented describes how much the company invests its
separately. (Meiza, 2015). Plesko (2002) in assets in the form of fixed assets and
Phillips et al., (2003). inventories. Fixed assets allow companies to
It was revealed that the higher the reduce taxes due to depreciation (Rodríguez
difference between fiscal earnings and and Arias, 2012) Management will invest in
accounting earnings shows the higher the fixed assets by using the company's unused
management discretion. The amount of funds to obtain benefits in the form of
discretion will affect the deferred tax burden depreciation costs that can be used as tax
and be able to be used to detect tax avoidance deductions (Dharmadi, 2013 in Dharma and
practices. So it can be concluded the higher the Noviari, 2017). Therefore, companies with
deferred tax reporting or deferred tax expenses many fixed assets will have a low tax expense
of the company as measured by the inter-period because of depreciation from fixed assets every
tax allocation will affect corporate tax year (Rodríguez and Arias, 2012). This opinion
avoidance, the higher the inter-period allocation supports the results of previous research
means the smaller the practice of tax avoidance conducted by Dharma and Noviari (2017) that
by the company. Based on the background that capital intensity has a positive effect on tax
has been described and the differences from the avoidance.
results of previous studies, the author wants to
conduct further research with the title The Hypothesis 2: Capital Intensity has a
Effect of Leverage, Capital Intensity and significant positive effect on Tax Avoidance
Deferred Tax Expense, Against Tax Avoidance
Deferred Tax Expense and Tax Avoidance the Indonesia Stock Exchange (IDX) during
2012-2018; (2)The companies were
Based on PSAK no. 46 tax allocation between successively listed on the Indonesia Stock
periods begins with the company having to Exchange during 2012-2018; (3)Automotive
recognize deferred tax assets and liabilities that sub-sector companies which successively
must be disclosed on the balance sheet. The published Financial Statements during 2012-
recognition of deferred tax assets and liabilities 2018; (4)Companies that did not experience
is recognition of the future tax consequences of losses during the 2012-2018 period.
the cumulative effect of temporary differences
in recognition of income and expenses for Measure
accounting and fiscal purposes. In the asset-
liability approach, what is meant by a In this study, to measure tax avoidance
temporary difference is the difference between researchers used the Effective Tax Rate (ETR)
the tax base (DPP) of an asset or liability and proxy. According Rodríguez and Arias (2012)
the carrying value of the asset or liability. The ETR can be measured by the formula:
effects of temporary changes reflected in an
𝑇𝑎𝑥 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
increase or decrease in deferred tax assets and 𝐸𝑇𝑅 = 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝐵𝑒𝑓𝑜𝑟𝑒 𝐼𝑛𝑐𝑜𝑚𝑒 𝑇𝑎𝑥 (1)
liabilities must be treated as deferred tax
expenses and disclosed in the current year's
profit and loss together with current tax
The first independent variable is leverage. One
expenses and presented separately (Meiza,
of the leverage ratios is the debt to asset ratio.
2015).
The formula of debt to asset ratio according to
Plesko (2002) in Phillips et al., (2003)
Rodríguez and Arias (2012) is :
revealed that the higher the difference between
fiscal earnings and accounting earnings shows 𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
the higher the management discretion. The 𝐷𝐴𝑅 = 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 (2)
amount of discretion will affect the deferred tax
expense and can be used to detect tax avoidance The second independent variable is capital
practices. So it can be concluded that the higher intensity. According to Dharma and Noviari
the deferred tax reporting or deferred tax (2017) capital intensity is measured using the
expenses of the company as measured by the following formula :
allocation of taxes between periods will affect 𝑇𝑜𝑡𝑎𝑙 𝐹𝑖𝑥 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝐼 = 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 (3)
corporate tax avoidance, the higher the inter-
period allocation means the smaller the practice
of corporate tax avoidance. It is in line with the The third independent variable is deferred tax
results of research conducted by Meiza (2015) expense. According to Meiza (2015) deferred
showing that deferred tax expense has a tax expense is calculated using the following
significant negative effect on tax avoidance. formula:
(𝐷𝑇𝐸𝑝−𝐷𝑇𝐸𝑝−1)
Hypothesis 3: Deferred tax expense has a 𝐷𝑇𝐸 = 𝑇𝐴 𝑝−1
significant negative effect on Tax Avoidance
(4)
Methods Where:
Sampling DTEp =Deferred tax expense on the
financial statements ending in year p.
The research uses quantitative methods. The DTEp-1 =Deferred tax expense on
data for this research uses secondary data. The financial statements ending year p-1.
sampling method used is nonprobability TAp-1 =Total assets in year p-1.
sampling, namely by purposive sampling. The
population in this study is the automotive Analysis
subsector company listed on the Indonesia
Stock Exchange (IDX) in 2012-2018. There are This research uses panel regresion model due to
criteria used to determine the sample: panel data is combination of cross section data
(1)Automotive sub-sector companies listed on
In the results of the descriptive statistic fixed assets. The standard deviation of capital
above, the maximum value of tax avoidance is intensity is 0,1590, which means the mean
0,5322. It identifies that the company with the value is greater than the standard deviation, so
maximum value does tax avoidance because the the data is homogeneous. The mean value for
ETR value >0,25. The mean value of tax the deferred tax expense is -0,0002, and the
avoidance is 0,2326, and the standard deviation standard deviation is 0,0033, which means the
is 0,0736, which means the mean value is mean value is smaller than the standard
greater than the standard deviation, so the data deviation value, so the data is heterogeneous.
is homogeneous. The mean value of leverage is
0,3259. It is considered quite good, because Multicollinearity Test
most of the assets of companies in the
automotive sub-sector are financed through Multicollinearity test is needed to determine
equity. The standard deviation leverage is whether there are similarities between
0,1098, which means the mean value is greater independent variables with others (Sujarweni,
than the standard deviation, so the data is 2015). There would be no multicollinearity
homogeneous. The mean capital intensity value provision if the correlation value among all
is 0,3572. It means that the average amount of independent variables tested <0.9 (Sarwono,
total company assets consists of 35.72% of 161:2016). The following are the results of the
fixed assets. It is possible because the Multicollinearity Test :
automotive sub-sector is one of the
manufacturing industries that has quite a lot of
In Table 2 shows a multicollinearity test results, variables tested <0,9. So it can be concluded
based on data from the test results show that the that this study did not occur multicollinearity.
correlation value between all independent
In Table 3 shows the results of A panel data (pooled data) is a data set that
heteroscedasticity test with a probability value contains individual sample data over a specified
> 0,05 it can be concluded that the data are not time period. By combining time-series data and
heteroscedasticity or heteroscedasticity does cross-section, data will be able to increase the
not occur. number of observations significantly. This
regression purpose is to test simultaneously and
Analysis of Panel Regression Model partially effect. Below is the result of a common
effect model test using Eviews 10 software.
Pohan (2009) which state that deferred tax Governance , Leverage , Return On
expense does not affect Tax Avoidance. Assets , Dan Ukuran Perusahaan Pada
Penghindaran Pajak. E-Jurnal Akuntansi
Universitas Udayana. 9.1 (2014): 143-
Conclusion
161, 1, 143–161.
Based on the results of the analysis and
discussion, the leverage, capital intensity, and Dharma, I. M. S., & Ardiana, P. A. (2016).
deferred tax expense simultaneously have a Pengaruh Leverage, Intensitas Aset Tetap,
significant effect on tax avoidance. But Ukuran Perusahaan, Dan Koneksi Politik
partially. Leverage and Deferred tax expense do Terhadap Tax Avoidance. E-Jurnal
not affect Tax Avoidance. While Capital Akuntansi Universitas Udayana, 15, 584–
Intensity partially has a positive effect on 613.
effective tax rates or has a negative effect on
Dharma, N. B. S., & Noviari, N. (2017).
Tax Avoidance.
Pengaruh Corporate Social Responsibility
For further research is expected to
Dan Capital Intensity Terhadap Tax
extend the research year and increase the
Avoidance. E-Jurnal Akuntansi
research sample. Besides, researchers are
Universitas Udayana, 18, 529–556.
expected to develop research by not removing
companies that have experienced losses. The
Irianto, B. S., Sudibyo, Y. A., & Wafirli, A.
sector used can also be developed to be outside
(2017). The Influence of Profitability,
the manufacturing industry by adding variables
Leverage, Firm Size and Capital Intensity
that are considered to have an influence on tax
Towards Tax Avoidance. International
avoidance such as corporate social
Journal of Accounting and Taxation, 5(2),
responsibility, company size, sales growth,
33–41.
independent commissioners, audit committees,
https://doi.org/10.15640/ijat.v5n2a3
political connections or other independent
variables. Kalbuana, N., Purwanti, T., & Agustin, N. H.
(2017). Pengaruh Kepemilikan
Manajerial, Beban Pajak Tangguhan, Dan
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