Analysis of Factors Affecting Tax Aggressiveness in Public Companies
DOI:
https://doi.org/10.62872/3d83ss69Keywords:
tax aggressiveness, institutional, leverage, profitability, governanceAbstract
This study analyses the factors that influence tax aggressiveness in public companies by examining the interaction between company financial characteristics, governance structure, and institutional environment. Using a quantitative panel data research design, this study evaluates 84 firm-year observations from Indonesia and Malaysia using fixed effects and random effects models to test how leverage, profitability, company size, ownership concentration, and governance quality influence tax aggressiveness as measured by cash effective tax rate and book-tax differences. The findings show that higher leverage and profitability increase tax aggressiveness, while greater board independence and better audit quality decrease it. Institutional factors such as regulatory enforcement, legal clarity, and audit intensity moderate corporate behaviour and shape the level of tax aggressiveness. The results of the study reveal that tax aggressiveness is not driven by a single variable, but is the result of a combination of financial incentives and institutional opportunities. Companies operating in a weak regulatory environment exhibit higher tax aggressiveness, confirming the role of institutional quality in shaping compliance. This study concludes that reducing tax aggressiveness requires comprehensive reforms that integrate the strengthening of corporate governance with improvements in law enforcement and regulatory clarity. These findings contribute by offering a multidimensional analysis that combines internal and external determinants of tax behaviour
Downloads
References
Alfandia, N. S. (2024). Examination of methods for limiting interest: Systematic literature review. Profit: Jurnal Adminsitrasi Bisnis, 18(2), 136-151.
Alfandia, N. S. (2024). How do countries curb their debt or profit shifting: a systematic literature review. Cogent Business & Management, 11(1), 2344032.
Auerbach, A. J., & Devereux, M. P. (2018). Capital taxation in the twenty-first century. Journal of Economic Perspectives, 32(4), 165–190.
Baker, P. (2016). BEPS Action 16: the taxpayers’ right to an effective legal remedy under European law in cross-border situations. EC Tax review, 25(5/6).
Beer, S., de Mooij, R., & Liu, L. (2020). International corporate tax avoidance: A review of the channels, magnitudes, and blind spots. Journal of Economic Surveys, 34(3), 660–688.
Blouin, J., & Robinson, L. (2020). Double counting accounting: How much profit is shifted and why. Review of Accounting Studies, 25(3), 1234–1265.
Buettner, T., Overesch, M., Schreiber, U., & Wamser, G. (2019). The impact of thin-capitalization rules on the capital structure of multinational firms. Journal of Public Economics, 176, 106–123.
Chand, V. (2016). Transfer pricing aspects of intra-group loans in light of the Base Erosion and Profit Shifting Action Plan. Intertax, 44(12).
Chen, R., El Ghoul, S., Guedhami, O., Wang, H., & Yang, Y. (2022). Corporate governance and tax avoidance: evidence from US cross-listing. The Accounting Review, 97(7), 49-78.
Chung, H., Kim, B. J., Lee, E. Y., & Sunwoo, H. Y. (2021). Debt financing and classification shifting of private firms. Managerial Auditing Journal, 36(7), 921-950.
Cobham, A., & Janský, P. (2019). Global distribution of revenue loss from corporate tax avoidance: Re-estimation and country results. Journal of International Development, 31(2), 110–125.
De Mooij, R., & Hebous, S. (2018). Curbing corporate debt bias: Tax policy challenges. IMF Economic Review, 66(3), 511–542.
Fitriantoro, M. J., & Abbas, Y. (2024). Does Tax Policy Change Affect Tax Avoidance Behaviour? Evidence from the Thin Capitalisation Rule in Indonesia. Asian Journal of Business and Accounting, 145-168.
Hanlon, M., & Heitzman, S. (2019). A review of tax research. Journal of Accounting and Economics, 67(2–3), 255–272.
Janský, P., & Palanský, M. (2019). Estimating the scale of profit shifting and tax revenue losses related to foreign direct investment. International Tax and Public Finance, 26(5), 1048–1086.
Johannesen, N., Tørsløv, T., & Wier, L. (2020). Are less developed countries more exposed to multinational tax avoidance? Method and evidence from micro-data. World Bank Economic Review, 34(3), 790–809.
Kemmanang, L. F. (2021). Do thin capitalization rules crowd out multinational firms in Africa? Looking towards efficiency in revenue mobilization''. Economics Bulletin, 41(2), 594-603.
Sari, D. K., Siregar, S. V., Martani, D., & Wondabio, L. S. (2023). The effect of audit quality on transfer pricing aggressiveness and firm risk: Evidence from Southeast Asian countries. Cogent Business & Management, 10(2), 2224151.
Stevens, S. A. (2020). Evaluation of the Earnings Stripping Rules. EC Tax Review, 29(4).
Tell, M. (2017). Interest limitation rules in the post-BEPS era. Intertax, 45(11).
Yoo, J. S. (2025). Global Anti-Base Erosion Rules (GloBE) and Location Choices of Multinational Corporations. Available at SSRN 5281367.
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Loso Judijanto (Author)
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
