Mohd. Rizal Palil, Suryo Utomo, Romlah Jaffar, Rosiati Ramli, Lokhman Hakim Osman, Mohd Helmi Ali, Nor Hazila Mohd Zain, Puji Handayati
Many corporate shareholders actively participated in their country‘s political arena. In order to maintain their political activities, they need easy, cheap and large sources of funds. Since companies‘ Effective Tax Rate (ETR) and shareholder‘s political motives are attached to two different entities, it seems practically impossible to measure the direct relationship between the variables. This paper examines the relationship between shareholder‘s political motive and companies‘ ETR using the Fraud-Risk Theory framework. This study employs a unique panel data of Indonesian companies during 2004 and 2014. A total of 252 entities, comprising 2772 firm-year observations, were analyzed. Results from multivariate data analysis support the notion that there is significant negative relationship between the two variables under study. This study concludes that shareholder‘s political motive is negatively related to corporate tax compliance level, and shareholder‘s political motive can be considered as a factor that has significant negative influence on ETR. © 2020 Global Research Online. All rights reserved.
Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Malaysia; Directorate General of Taxes, Indonesia; Infrastucture University Kuala Lumpur, Malaysia; Universitas Negeri Malang, Indonesia
