Open AccessFamily Ownership and Tax Avoidance: An Analysis of Foreign Related Party Transactions and Dividend Payments
Author(s) -
Nuritomo,
Sidharta Utama,
Ancella Anitawati Hermawan
Publication year - 2020
Publication title -
international journal of business and society
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.236
H-Index - 15
ISSN - 1511-6670
DOI - 10.33736/ijbs.3280.2020
Subject(s) - business , dividend , shareholder , dividend tax , monetary economics , payment , tax avoidance , double taxation , accounting , tax reform , economics , finance , public economics , state income tax , corporate governance , gross income
This paper aims to investigate the effect of shareholder tax burden on related party transactions (RPTs) and dividend payments in Indonesia. The paper also investigates the moderating effect of family ownership on the relationship between shareholder tax burden, RPTs and dividend payments. The study uses 451 firm-year observations comprising hand-collected data for the period 2010–2015. The results suggest that a high shareholder tax burden has a positive effect on RPTs and a negative effect on dividend payments. This indicates that companies engage in tax avoidance through dividend minimization and RPTs. When faced with a high tax burden, companies tend to reduce dividends and increase their RPTs in a bid to reduce their tax burden. This research also shows that the positive effect of shareholder tax burden on RPTs is weakened with greater family ownership and that the negative effect of shareholder tax burden on dividend payments is strengthened by greater family ownership. This proves that Indonesian family firms tend to engage in tax avoidance through the use of dividend mechanisms as opposed to RPTs.