Indah Masri Researches the Role of Multinational Corporate Tax Risk Management and Corporate Governance in ASEAN-4
Nino Eka Putra ~ Humas FEB UI
DEPOK – Postgraduate Program in Accounting, Faculty of Economics and Business, University of Indonesia held an open session of the Promotion of Doctoral Doctor Indah Masri (1406591680) at the Postgraduate Auditorium, Postgraduate Building, Friday (1/3/2020).
The Doctoral Promotion Session was chaired by Prof. Nachrowi Djalal Nachrowi, Ph.D., with his supervisor, Prof. Ahmad Syakhroza, Ph.D. (Promoter), Dr. Ratna Wardhani (Co-Promoter 1), and Dr. Samingun (Co-Promoter 2). As the testing team, Prof. Sidharta Utama, Ph.D. (Chief Examiner), Prof. Dr. John Hutagaol, Dr. Fitriani, Siti Nuryanah, Ph.D., and Dr. Telisa Aulia Falianti.
The dissertation raised by Promovendus, entitled “The Role of Tax Risk Management and Corporate Governance in the Relationship Between International Tax Avoidance Practices and Profit Quality in Multinational Companies in ASEAN-4”.
This study aims to examine the effect of international tax practices such as income shifting, transfer pricing, multinationality, tax havens, and thin capitalization on tax avoidance in multinational companies in ASEAN-4. In addition, it also looks at the effect of these international tax practices both directly and indirectly through tax avoidance (as an intervening variable) on earnings quality.
This study adds the role of tax risk management and corporate governance to weaken the influence of international tax practices on tax avoidance and strengthen the direct or indirect influence of international tax practices on earnings quality. This dissertation uses panel balance data on multinational companies that have overseas subsidiaries in ASEAN-4 countries (Indonesia, Malaysia, Singapore and the Philippines) for the observation year from 2010-2016.
“The results show that of the five international tax practices tested, it is proven that four international tax practices except multinationality practices can increase the amount of tax avoidance, which means these four practices are common practices by multinational companies in ASEAN-4 with the aim of reducing the amount of tax paid,” Said Indah.
In contrast, multinationality practices show no significant effect. And managed to prove that even though more and more subsidiaries are abroad, the company is not inclined to tax avoidance. Judging from the examination of the direct or indirect influence of international tax practices on earnings quality in general is proven to reduce earnings quality both earnings informatization (ERC) and earnings persistence.
This research successfully proved that tax avoidance can be used as an intervening variable on the indirect effect of international tax practices on earnings quality. “The role of tax risk management shows that it has further strengthened the influence of international tax practices on tax avoidance, especially on transfer pricing practices,” he added.
On the other hand, the results of this study prove that the practice of transfer pricing is a form of tax avoidance practice that has a lower level of risk than other practices and is difficult to detect and prove by tax inspectors. Likewise, the role of tax risk management on the direct and indirect effects in general shows the weakening effect of international tax practices on earnings quality.
This can be caused by companies that have implemented better tax risk management will feel safe to carry out international tax practices, especially transfer pricing because it is difficult to detect, so companies will be less transparent and persistent in disclosing profit information.
“The role of corporate governance shows to further strengthen the effect of international tax practices on tax avoidance especially on thin capitalization practices. The results of this study succeeded in proving that the practice of thin capitalization shows the existence of non-optimistic behavior of management because it is done in the interests of the company rather than the personal interests of management,” he explained.
Likewise, the role of corporate governance in the direct relationship and not international tax practices on earnings quality generally shows the weakening effect of international tax practices on earnings quality. This is because multinational companies that have good corporate governance assessment tend to have a good reputation, so the practice of tax avoidance poses a relatively large risk to the company’s reputation if detected by a tax examiner.
“Multinational companies that have good corporate governance will tend to cover up their tax avoidance practices by not being transparent and persistent in disclosing their profit information,” he concluded.
Thus, the Leadership Council of the open session of doctoral promotion decided, Indah Masri (1406591680) was declared to graduate with the title of Very Satisfactory and succeeded in obtaining the 69th Doctorate in Accounting. Congratulations to Dr. Indah Masri! (Des)
