THE EFFECT OF CORPORATE GOVERNANCE MECHANISM AND ACCOUNTING CONSERVATIONS ON TAX AVOIDANCE

Abstract

In Indonesia, tax represents expenditure that reduces revenues for companies while for government, tax is a source of income. The companies adjusts income statements to minimize tax expense, thus affects net income reported. The purpose of this study is to explain the influence of accounting conservatism and corporate governance mechanism against tax avoidance. This study sampled 123 companies listed in Indonesia Stock Exchange (IDX) in 2014 until 2016. The sampling technique uses the following criteria: (1) companies listed in IDX particularly manufacturing sector; (2) having audited financial statements over the period of 2014-2016; (3) having data on managerial ownership, institutional ownership, audit quality; (4) generate consecutive earnings over the period of 2014-2016. Meanwhile, hypothesis testing used multiple regression analysis. The results of this study indicate that conservatism has no effect on tax avoidance, managerial ownership has a negative effect on tax avoidance, institutional ownership has no effect on tax avoidance and audit quality has no effect on tax avoidance.