The Impact of Ownership Structure and Corporate Governance on Tax Aggressiveness of Indonesian Public Companies: Implications of the 2008 Tax Reform

Busra Kurniawan and Vid Adrison

Journal of Tax Reform, 2025, vol. 11, issue 1, 221-242

Abstract: This study examines the intricate relationship between corporate governance specifically focusing on public ownership structures and board composition and tax aggressiveness in publicly listed companies in Indonesia. Additionally, it evaluates the impact of the 2008 tax reform on corporate tax behavior and its implications for business practices in the region. The research utilizes a comprehensive sample comprising 3,385 observations spanning the period from 2005 to 2019. Employing the System Generalized Method of Moments (GMM) Two-Step method, along with a tax avoidance proxy developed by Henry & Sansing, the findings indicate that public ownership does not significantly reduce tax aggressiveness in either the overall sample or among profit-making firms. In contrast, the study reveals a significant negative relationship between the proportion of independent board members and tax aggressiveness within profit-making companies, although the economic significance of this relationship is relatively minor. Additionally, post-reform analyses indicate a general decrease in average tax aggressiveness among public companies, attributed to the expansion of the tax base and improvements in the tax administration system implemented by the government. This study further suggests that tax planning strategies employed by public companies tend to be long-term, particularly in response to evolving tax policies and regulatory environments. The implications of these findings are crucial for policymakers and corporate stakeholders as they navigate the complexities of tax compliance and corporate governance. Overall, the results highlight the need for robust governance frameworks that enhance transparency and accountability in tax practices, ultimately fostering a more equitable and efficient corporate tax environment in Indonesia.

Keywords: public ownership; board composition; tax aggressiveness; tax reform; general method of moments (search for similar items in EconPapers)
JEL-codes: G34 H25 H26 H32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:aiy:jnljtr:v:11:y:2025:i:1:p:221-242

DOI: 10.15826/jtr.2025.11.1.199

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