The role of country by country reporting on corporate tax avoidance: Does it effective for the tax haven?

Figures & data

Figure 1. Conceptual framework.

Table 1. Sample selection

	Companies
Companies listed at Indonesia Stock Exchange in 2019 Financial Companies listed at Indonesia Stock Exchange in 2019 Nonfinancial companies listed at Indonesia Stock Exchange in 2019 Non-Multinational Companies, new listed companies, and delisting companies during 2010–2019 Non-Financial Multinational Companies listed during 2010–2019 Incomplete Financial Statement DataFinal sample	668 (90) 578 (408) 170 (4) 166
Firm year observation 166 companies x 10 years Incomplete data Final firm year observation (unbalanced panel data)	1660 observations (345 observations) 1315 observations

Table 2. Descriptive statistics

Panel A. Variables with Continous Data
Variable	N		Mean		Standard Deviation	Min		Max
Abnormal_RPT	1315		.5927		.1307	.2002		1.0917
ETR	1315		.2516		.1623	0		.8656
BTD	1315		−.0275		.0643	−.2809		.1206
LnSize	1315		15.5242		1.5123	11.9068		19.0063
ROA	1315		.0994		.1200	−.1791		.5803
Growth	1315		2.5467		3.9377	−.0489		28.8745
RD	1315		.4707		.2056	.0696		1.2429
Intangible	1315		.0147		.0395	0		.2388
Cap_intens	1315		.3521		0.2247	.0014		.8492
Panel B. Variables with Dichotomous Data
Variable		N		Dummy 1			Dummy 0
CbCR		1315		40.30%			59.70%
Taxhaven		1315		60.84			39.16%

Table 3. Correlation matrix of predictor variables

	CbCR	TaxHaven	LnSize	ROA	Growth	RD	Intangible	Cap_ Intens
CbCR	1
TaxHaven	0.0431	1
LnSize	0.1577***	0.2767***	1
ROA	−0.0936***	−0.0753**	0.0032	1
Growth	−0.0772**	−0.0264	0.0521	0.5466***	1
RD	0.0013	0.0297	−0.0817**	−0.0425	0.0099	1
Intangible	−0.0199	0.0900**	0.2023***	0.0340	0.0422	−0.0572*	1
Cap_Intens	0.0072	−0.0224	0.0125	−0.0431	0.0532	0.1232***	−0.1142***	1

* p < 0.05, ** p < 0.01, *** p < 0.001

Table 4. Transfer pricing regulation hypothesis

	Corporate Tax Avoidance in General		Corporate Tax Avoidance by Transfer Pricing
Variables	ETR	BTD	Abnormal_RPT
CbCR	−0.0029	−0.0053	−0.0349***
	(0.0210)	(0.0068)	(0.0120)
LnSize	0.0142**	0.0054**	0.0013
	(0.0056)	(0.0024)	(0.0049)
ROA	−0.1490**	−0.1780***	−0.3390***
	(0.0753)	(0.0588)	(0.0835)
Growth	−0.0013	0.0032***	−0.0089***
	(0.0020)	(0.0010)	(0.0016)
Intangible	−0.0368	−0.0953	−0.1790
	(0.1740)	(0.0823)	(0.1480)
Cap_Intens	0.0139	0.0186	0.0291
	(0.0418)	(0.0172)	(0.0425)
RD	−0.3100	−0.3300*	−0.0931
	(0.3820)	(0.1940)	(0.5320)
Constant	0.0647	−0.0974**	0.6400***
	(0.0929)	(0.0388)	(0.0851)
Year Effect	Yes	Yes	Yes
Industry Effect	Yes	Yes	Yes
Observations	1,315	1,315	1,315
Adj R^2	0.6410	0.1982	0.3607
F-statistics	1.78**	3.43***	14.82***

Robust standard errors in parentheses

*** p < 0.01, ** p < 0.05, * p < 0.1

Table 5. Tax haven influence regression result

	Corporate Tax Avoidance in General		Corporate Tax Avoidance by Transfer Pricing
Variables	ETR	BTD	Abnormal_RPT
TaxHaven	−0.0036	0.0123***	0.0261***
	(0.0158)	(0.0033)	(0.0062)
LnSize	0.01450**	0.0043***	−0.0009
	(0.0059)	(0.0011)	(0.0023)
ROA	−0.1500*	−0.1740***	−0.3294***
	(0.0767)	(0.0284)	(0.0509)
Growth	−0.0013	0.0032***	−0.0089***
	(0.0020)	(0.0006)	(0.0010)
Intangible	−0.0364	−0.0966**	−0.1813**
	(0.1740)	(0.0474)	(0.0743)
Cap_Intens	0.0136	0.0198**	0.0317
	(0.0421)	(0.0089)	(0.0195)
RD	−0.3050	−0.3480***	−0.1313
	(0.3830)	(0.0929)	(0.2385)
Constant	0.0627	−0.0906***	0.6548***
	(0.0921)	(0.0192)	(0.0376)
Year Effect	Yes	Yes	Yes
Industry Effect	Yes	Yes	Yes
Observations	1,315	1,315	1,315
Adj R^2	0.0635	0.2052	0.380
F-statistics	1.69**	10.02***	61.24***

Robust standard errors in parentheses

*** p < 0.01, ** p < 0.05, * p < 0.1

Table 6. Moderating effect of transfer pricing regulation

Variables	Corporate Tax Avoidance in General				Corporate Tax Avoidance by Transfer Pricing
	ETR		BTD		Abnormal_RPT
		(3)		(3)		(3)
TaxHaven	−0.0036	−0.0102	0.0123***	0.0117**	0.0261***	0.0340***
	(0.0158)	(0.0224)	(0.0034)	(0.0049)	(0.0062)	(0.0095)
CbCR	−0.0031	0.0034	−0.0049	−0.0043	−0.0339**	−0.0417***
	(0.0209)	(0.0249)	(0.0068)	(0.0081)	(0.0138)	(0.0160)
TaxHaven*CbCR		0.0108		0.0009		−0.0130
		(0.0201)		(0.0066)		(0.0123)
LnSize	0.0145**	0.0145**	0.0043***	0.0043***	−0.0009	−0.0009
	(0.0056)	(0.0056)	(0.0011)	(0.0011)	(0.0023)	(0.0023)
ROA	−0.150*	−0.1500*	−0.1740***	−0.1740***	−0.3290***	−0.3300***
	(0.0767)	(0.0769)	(0.0284)	(0.0284)	(0.0509)	(0.0508)
Growth	−0.0013	−0.0013	0.0032***	0.0032***	−0.0089***	−0.0089***
	(0.0020)	(0.0020)	(0.0006)	(0.0005)	(0.0010)	(0.0010)
Intangible	−0.0364	−0.0363	−0.0966**	−0.0966**	−0.1810**	−0.1810**
	(0.1740)	(0.1740)	(0.0474)	(0.0474)	(0.0743)	(0.0742)
Cap_Intens	0.0136	0.0135	0.0198**	0.0198**	0.0317	0.0318
	(0.0421)	(0.0421)	(0.0089)	(0.0089)	(0.0195)	(0.0195)
RD	−0.3050	−0.2990	−0.3480***	−0.3470***	−0.1310	−0.1380
	(0.3830)	(0.3850)	(0.0929)	(0.0929)	(0.2390)	(0.2370)
Constant	0.0627	0.0602	−0.0906***	−0.0908***	0.6548***	0.6578***
	(0.0921)	(0.0925)	(0.0192)	(0.0192)	(0.0376)	(0.0379)
Year Effect	Yes	Yes	Yes	Yes	Yes	Yes
Industry Effect	Yes	Yes	Yes	Yes	Yes	Yes
Observations	1,315	1,315	1,315	1,315	1,315	1,315
Adj R^2	0.0635	0.0630	0.2052	0.2046	0.3686	0.3687
F-statistics	1.69**	1.63**	10.02***	9.61***	61.24***	58.80***

Robust standard errors in parentheses*** p < 0.01, ** p < 0.05, * p < 0.1

Table 7. Transfer pricing regulation—random effect estimation

	Corporate Tax Avoidance in General		Corporate Tax Avoidance by Transfer Pricing
Variables	ETR	BTD	Abnormal TP
CbCR	0.0014	0.0003	−0.0400***
	(0.0189)	(0.0054)	(0.0125)
LnSize	0.0178***	0.0025	0.0121*
	(0.0056)	(0.0023)	(0.0073)
ROA	−0.1210**	−0.1030**	−0.1660***
	(0.0575)	(0.0456)	(0.0450)
Growth	−0.0016	0.0012	−0.0132***
	(0.0015)	(0.0007)	(0.0014)
Intangible	0.0474	−0.0802	−0.2300**
	(0.1790)	(0.0738)	(0.1080)
Cap_Intens	0.0755*	0.0221	0.0324
	(0.0431)	(0.0160)	(0.0289)
RD	−0.4000	−0.0429	−0.5730
	(0.5180)	(0.1110)	(0.3960)
Constant	−0.0289	−0.0620*	0.4840***
	(0.0956)	(0.0370)	(0.1200)
Year Effect	Yes	Yes	Yes
Industry Effect	Yes	Yes	Yes
Observations	1,315	1,315	1,315
Chi square	48.42***	76.25***	366.84***

Robust standard errors in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1

Table 8. The moderating effect of transfer pricing regulation on tax haven and corporate tax avoidance relationship—random effect estimation

Variables	Corporate Tax Avoidance in General				Corporate Tax Avoidance by Transfer Pricing
	ETR		BTD		Abnormal RPT
		(3)		(3)		(3)
TaxHaven	−0.00932	−0.0130	0.0157**	0.0117*	−0.0145	−0.00761
	(0.0164)	(0.0227)	(0.00644)	(0.00685)	(0.0154)	(0.0170)
CbCR	0.00133	0.00495	0.000161	0.00410	−0.0397***	−0.0464***
	(0.0189)	(0.0225)	(0.00531)	(0.00653)	(0.0124)	(0.0148)
TaxHaven*CbCR		0.00596		0.00640		−0.0107
		(0.0193)		(0.00600)		(0.0111)
LnSize	0.0184***	0.0184***	0.00150	0.00142	0.0129*	0.0131*
	(0.00563)	(0.00562)	(0.00231)	(0.00232)	(0.00736)	(0.00735)
ROA	−0.121**	−0.121**	−0.105**	−0.104**	−0.164***	−0.165***
	(0.0579)	(0.0580)	(0.0449)	(0.0449)	(0.0451)	(0.0453)
Growth	−0.00160	−0.00160	0.00123*	0.00122*	−0.0132***	−0.0132***
	(0.00150)	(0.00150)	(0.000743)	(0.000743)	(0.00139)	(0.00142)
Intangible	0.0468	0.0461	−0.0754	−0.0776	−0.236**	−0.231**
	(0.178)	(0.179)	(0.0663)	(0.0656)	(0.109)	(0.107)
Cap_Intens	0.0757*	0.0759*	0.0215	0.0215	0.0332	0.0332
	(0.0431)	(0.0431)	(0.0158)	(0.0157)	(0.0289)	(0.0288)
RD	−0.3965	−0.3966	−0.0464	−0.0482	−0.570	−0.565
	(0.520)	(0.524)	(0.117)	(0.116)	(0.396)	(0.389)
Constant	−0.0330	−0.0342	−0.0574	−0.0574	0.4811***	0.4804***
	(0.0955)	(0.0959)	(0.0372)	(0.0372)	(0.1194)	(0.1193)
Observations	1,315	1,315	1,315	1,315	1,315	1,315
Chi square	47.73***	47.78***	86.66***	87.81***	366.09***	363.16***

Robust standard errors in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1

Table 9. Parametric and non-parametric test between tax haven and non-tax haven firm

Panel A. ETR
	Test Groups
	Parametric test					Non Parametric test
	t-test					Mann-Whitney (Wilcoxon rank-sum)				Kruskall-Wallis
	Mean			t		Mean Rank		Z		Mean Rank	X^2
Non tax haven	0.249			−0.514		663.696		0.436		663.696	0.190
Tax haven	0.253					654.333				654.333
Panel B. BTD
	Test Groups
	Parametric test					Non Parametric test
	t-test					Mann-Whitney (Wilcoxon rank-sum)				Kruskall-Wallis
Non tax haven	Mean			t		Mean Rank		Z		Mean Rank	X^2
Tax haven	−0.022					678.543				678.543
Panel C. Abnormal RPT
		Test Groups
		Parametric test			Non Parametric test
		t-test			Mann-Whitney (Wilcoxon rank-sum)				Kruskall-Wallis
		Mean	t		Mean Rank		Z		Mean Rank		X^2
Non tax haven		0.576	−3.820***		590.478		−5.173***		590.478		26.763***
Tax haven		0.604			701.468				701.468

*** p < 0.01, ** p < 0.05, * p < 0.1

Table 10. Parametric and non-parametric test for pre and post regulation for tax haven firms

Panel A. ETR
	Test Groups
	Parametric test							Non Parametric test
	t-test							Mann-Whitney (Wilcoxon rank-sum)						Kruskall-Wallis
ETR	Mean				t			Mean Rank			Z			Mean Rank			X^2
Pre-regulation	0.254				0.101			395,5474 407,3393			−0.712			395,5474 407,3393			0.507
Post-regulation	0.253
Panel B. BTD
		Test Groups
		Parametric test							Non Parametric test
		t-test							Mann-Whitney (Wilcoxon rank-sum)						Kruskall-Wallis
BTD		Mean				T			Mean Rank			Z			Mean Rank			X^2
Pre-regulation		−0.022				0.101			401,8998 398,567			0.201			401,8998 398,567			0.041
Post-regulation		−0.023
Panel C. Abnormal RPT
			Test Groups
			Parametric test				Non Parametric test
			t-test				Mann-Whitney (Wilcoxon rank-sum)						Kruskall-Wallis
Abnormal_RPT			Mean	t			Mean Rank			Z			Mean Rank			X^2
Pre-regulation			0.394	0.412			405,1218 394,1176			0.665			405,1218 394,1176			0.442
Post-regulation			0.392

Table

Variable	Measurement
Coporate Tax Avoidance	1. Abnormal_RPTit = α0 + α1Sizeit + α2Leverageit + α3Growthit + Ɛit Abnormal_RPT = related party sales and purchase/total asset; Size = natural log of total assets; Leverage = total debt divided by total assets; Growth = market capitalization/shareholder equity 2. BTD = (pre-tax income—taxable income)/total assets 3. ETR = the ratio of total (i.e., current and deferred) income tax expenses to pretax book income
CbCR	CbCR is coded 1 for the year after regulation (2016–2019), 0 otherwise
Tax Haven	Tax haven is coded 1 if companies have affiliation in tax haven countries, 0 otherwise
LnSize	Logarithm natural of total assets
Growth	Market capitalization over the book value of total shareholders’ equity
ROA	After tax income/total assets
RD	R&D expense divided by total assets
Intangible	Intangible assets/total assets
Capital intensity	Property Plant Equipment/total assets