CSR DISCLOSURE AND TAX AVOIDANCE:

INTERNATIONALISATION AS A
MODERATING VARIABLE

Hidayah Asfaro Saragih, Chaerul D. Djakman and Desi Adhariani

(Universitas Indonesia)

Presented at The 6th International Accounting Conference (IAC), 27th-29th August 2017, Yogyakarta.

Supported by
Lembaga Pengelola Dana Pendidikan
Gedung A.A. Maramis II Lantai 2, Jalan Lapangan Banteng Timur No. 1, Jakarta 10710
Telepon/Fax (021) 384 6474, Laman: www.lpdp.depkeu.go.id
 Literature
Background Objective Methodology Result Conclusion
Study

Tax plays significant role as a component of Indonesian Revenue and

Expenditure Budget since it contributes as the largest source of revenue,
which makes the target of this sector will continue to increase every
year.

However, the government’s objectives are often contrary to the

company’s objectives. The company continues to avoid tax payment
(Sikka, 2010) with the purpose to increase the shareholder value (Hanlon
and Heitzman, 2010) and management welfare (Armstrong et al., 2015).

With the increasingly accessible tax havens, communication innovations

and capital mobility, the previous studies have proven that all of those
things provide opportunities for companies to further avoid taxes (Rego,
2003; Christensen and Murphy, 2004; Wilson, 2009).
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 Literature
Background Objective Methodology Result Conclusion
Study

Previous studies have shown that more internationalized firms engage in

more CSR, but academics also found that globalization and tax avoidance
are positively related.

This study refers to Strater (2016) who found that the more
internationalized the company, the weaker the positive effect of CSR on
tax avoidance.

Therefore, this study further investigates the relationship between CSR

and tax avoidance. This research was also the first study examining
whether internationalization moderates the relationship between CSR
and tax avoidance in Indonesia.

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 Literature
Background Objective Methodology Result Conclusion
Study

Research Objectives:
• Investigate the effect of CSR disclosure on tax avoidance
• Examine the mediating role of internationalization against the
relationship between CSR disclosure and tax avoidance.
Research Contributions:
• First empirical research that investigate the linkage between CSR
disclosure, internationalization, and tax avoidance in Indonesia.
• CSR is measured by a coverage ratio that refers to the Verbateen
study (2016). This proxy has not been used as a measure of CSR
disclosure in Indonesia.

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 Literature
Background Objective Methodology Result Conclusion
Study

Agency Theory Legitimacy Theory

• The conflict of interests focused in this
study was the conflict between
management and tax authorities
(government).
• In carrying out their social
responsibilities, companies need to
provide information about CSR as part
of a dialogue with the community (Gray
et al., 1995). In addition, they should
make convincing disclosures so that the
legitimacy of companies is not
threatened (Newson & Deegan, 2002).

Signalling Theory
• To reduce the information
asymmetry by providing
signals to stakeholders, for
example through disclosure of
CSR activities.
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 Hypotheses
Background Objective Methodology Result Conclusion
Development

H1: CSR disclosure positively affects tax avoidance

H2: Internationalization positively affects tax avoidance

H3: Internasionalisasi memoderasi positif pengaruh positif pengungkapan CSR

terhadap penghindaran pajak

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 Literature
Background Objective Methodology Result Conclusion
Study

• Approach : Quantitative
• Unit of analysis : Manufacturing companies listed on BEI during
2013-2015
• Research instrument : Financial Statement and Annual Report (www.idx.co.id)
• Data Analysis Technique: Regression analysis of unbalanced data panel
(Random Effect) with Stata 12 and content analysis with
NVIVO 11.
• Population : All manufacturing companies listed on the Indonesia
Stock Exchange during 2013-2015.
• Sampling technique : Purposive sampling with criteria:
1) the company with the fiscal year 31 December
2) do not suffer fiscal or accounting losses in order not to cause
the value of Effective Tax Rate (ETR) distorted (Richardson and
Lanis, 2007; Zimmerman, 2003)
3) has an ETR <1 value so as not to create problems in model
estimation (Gupta and Newberry, 1997)
4) make sales abroad, and
5) have the required research data.

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 Literature
Background Objective Methodology Result Conclusion
Study

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 Literature
Background Objective Methodology Result Conclusion
Study

Measurement of
CSR Disclosure

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 Literature
Background Objective Methodology Result Conclusion
Study

• CSR disclosure positively

affects tax avoidance
indicated by low
(negative) ETR values ​so
that H1 is supported.
• Internationalization has
no effect on tax
avoidance so that H2 is
not supported.
• Internationalization does
not moderate the positive
influence of CSR on tax
avoidance so that H3 is
not supported.

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 Literature
Background Objective Methodology Result Conclusion
Study

Objective To investigate the effect of CSR disclosure on tax avoidance with

internationalization as a moderating variable.

Result • CSR disclosure has a positive effect on tax avoidance.

• Internationalization has no effect on tax avoidance and has no moderating role
in the positive association between CSR disclosure and tax avoidance
Implication Theoretical:
Extend literatures about CSR, internationalization, and tax avoidance.
Practical:
For government, these results can be used as inputs to formulate policies and
rules that will limit the opportunistic behaviours of firms to avoid taxes, for
example more disclosures about tax planning and management.
Limitation 1) The measurement of research variables; 2) Samples limited to manufacturing
companies; 3) The topic need to be explored to check for consistency of results.

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Thank you!