The Relations between Labor Investment Inefficiency and Tax Avoidance: The Covid-19 Pandemic as a Moderating Variable

Achyar Achyar, Yulianti Yulianti

Abstract


This study aims to (1) analyze the relations between labor investment inefficiency and tax avoidance and (2) whether the COVID-19 pandemic moderates the relations between labor inefficiency and tax avoidance behavior in manufacturing companies in Indonesia. By using a sample of 110 manufacturing companies listed on the Indonesia Stock Exchange (www.idx.co.id) in the 2016-2020 period and processed using the Ordinary Least Squares (OLS) method, this study finds that labor investment inefficiency has a significant negative effect on tax avoidance. Moreover, Covid-19 has also strengthened the relations between labor investment inefficiency and tax avoidance.


Full Text:

PDF

References


Agnes Cheng, C. S., Huang, H. H., Li, Y., & Stanfield, J. (2012). The effect of hedge fund activism on corporate tax avoidance. Accounting Review, 87(5), 1493–1526. https://doi.org/10.2308/accr-50195

Armstrong, C. S., Blouin, J. L., Jagolinzer, A. D., & Larcker, D. F. (2015). Corporate governance, incentives, and tax avoidance. Journal of Accounting and Economics, 60(1), 1–17. https://doi.org/10.1016/j.jacceco.2015.02.003

Balakrishnan, K., Blouin, J. L., & Guay, W. R. (2019). Tax aggressiveness and corporate transparency. Accounting Review, 94(1), 45–69. https://doi.org/10.2308/accr-52130

Boerger, L. (2016). Neoclassical economics. Exploring Economics, 18.

Brahmana, R. K. (2007). Identifying Financial Distress Condition in Indonesia Manufacture Industry. 1–19.

Chen, C., & Lai, S. (2012). Financial Constraint and Tax Aggressiveness. Working Paper, University of Auckland, 1–41.

Chen, F., Hope, O. K., Li, Q., & Wang, X. (2011). Financial reporting quality and investment efficiency of private firms in emerging markets. Accounting Review, 86(4), 1255–1288. https://doi.org/10.2308/accr-10040

Chen, S., Chen, X., Cheng, Q., & Shevlin, T. (2010). Are family firms more tax aggressive than non-family firms? Journal of Financial Economics, 95(1), 41–61. https://doi.org/10.1016/j.jfineco.2009.02.003

Deegan, C. M. (2014). Financial Accounting Theory (4th ed.). McGraw-Hill Education (Australia).

Dyreng, S. D., Hanlon, M., & Maydew, E. L. (2008). Long-run corporate tax avoidance. Accounting Review, 83(1), 61–82. https://doi.org/10.2308/accr.2008.83.1.61

Gupta, S., & Newberry, K. (1997). Determinants of the variability of corporate effective tax rates: Evidence from Longitudinal Data. Journal of Accounting and Public Policy, 50, 113–131. https://doi.org/10.2753/REE1540-496X5004S4007

Hanlon, M., & Heitzman, S. (2010). A review of tax research. Journal of Accounting and Economics, 50(2–3), 127–178. https://doi.org/10.1016/j.jacceco.2010.09.002

Jung, B., Lee, W. J., & Weber, D. P. (2014). Financial Reporting Quality and Labor Investment Efficiency. Contemporary Accounting Research, 31(4), 1047–1076. https://doi.org/10.1111/1911-3846.12053

Law, K. K. F., & Mills, L. F. (2015). Taxes and Financial Constraints: Evidence from Linguistic Cues. Journal of Accounting Research, 53(4), 777–819. https://doi.org/10.1111/1475-679X.12081

McGuire, S. T., Omer, T. C., & Wang, D. (2012). Tax avoidance: Does tax-specific industry expertise make a difference? Accounting Review, 87(3), 975–1003. https://doi.org/10.2308/accr-10215

Pindyck, R. S. (1988). Irreversible Investment , Capacity Choice , and the Value of the Firm. The American Economic Review, 78(5), 969–985.

Pinnuck, M., & Lillis, A. M. (2007). Profits versus losses: Does reporting an accounting loss act as a heuristic trigger to exercise the abandonment option and divest employees? Accounting Review, 82(4), 1031–1053. https://doi.org/10.2308/accr.2007.82.4.1031

Platt, H. D., & Platt, M. B. (2002). Predicting corporate financial distress: Reflections on choice-based sample bias. Journal of Economics and Finance, 26(2), 184–199. https://doi.org/10.1007/bf02755985

Rego, S. O. (2003). Tax Avoidance of U.S. Multinational Corporations. Contemporary Accounting Research, 20, 805–833.

Richardson, Taylor, G., & Lanis, R. (2015). The impact of financial distress on corporate tax avoidance spanning the global financial crisis: Evidence from Australia. Economic Modelling, 44, 44–53. https://doi.org/10.1016/j.econmod.2014.09.015

Salihu, I. A., Obid, S. N. S., & Annuar, H. A. (2013). Measures of corporate tax avoidance: Empirical evidence from an emerging economy. International Journal of Business and Society, 14(3), 412–427.

Taylor, G., Al-Hadi, A., Richardson, G., Alfarhan, U., & Al-Yahyaee, K. (2019). Is there a relation between labor investment inefficiency and corporate tax avoidance? Economic Modelling, 82(September 2018), 185–201. https://doi.org/10.1016/j.econmod.2019.01.006

WHO. (2020). Coronavirus Disease 2019 (COVID-19) Situation Report - 2 (Vol. 2, Issue April).

Zheng, M. (2019). Tax Avoidance Activities and Investment Efficiency. 334(Hsmet), 330–335. https://doi.org/10.2991/hsmet-19.2019.59

Zimmerman, J. L. (1983). TAXES AND FIRM SIZE * Previous accounting studies hypothesized that large firms are subjected to greater government scrutiny and wealth transfers than smaller firms and therefore to reduce these political costs , large firms choose income reducing account. Journal of Accounting and Economics, 5(June), 119–149.




DOI: https://doi.org/10.32535/jicp.v4i3.1356

Refbacks

  • There are currently no refbacks.


Copyright (c) 2021 Achyar Achyar, Yulianti Yulianti

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

Flag Counter

Published by:

AIBPM Publisher

Editorial Office:

JL. Kahuripan No. 9 Hotel Sahid Montana, Malang, Indonesia
Phone:+62 341 366222
Email: journal.jicp@gmail.com
Website:http://ejournal.aibpmjournals.com/index.php/JICP

Supported by: Association of International Business & Professional Management

If you are interested to get the journal subscription you can contact us at admin@aibpm.org.

ISSN 2622-0989 (Print)
ISSN 2621-993X (Online)

DOI:Prefix 10.32535 by CrossREF

Journal of International Conference Proceedings (JICP) INDEXED:

 

In Process


This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.