Is Tax Accounting Information Relevant to Users? The Case of Indonesia

Abstract

This research aimed to investigate whether the tax accounting contained in financial statements is relevant to users’ decision-making and represents compliance with the tax laws. In this research, tax accounting information is classified into (1) tax recognition items (TRI) and (2) tax disclosure items (TDI). Survey data were collected from 131 professional tax accountants in Indonesia. The study employed two analysis methods: (1) the paired sample test, to determine whether there was any gap between the current condition and the expected condition of tax accounting information; and (2) regression analysis, to establish whether tax accounting information affected the relevance of financial statements. The results showed that (1) there were more gaps in TRI than in TDI; and (2) while TRI created relevance, TDI did not. This result indicates that tax accounting information is essential to improve decision-making. However, there are gaps and inadequate information. These results also imply that the accounting standards setter should improve the standards so that tax accounting provides value to financial statement users.