Political connection as a double-edged sword: the case of tax aggressiveness practice during the COVID-19 pandemic

Astrid Rudyanto, Julisar Julisar and Debora Debora

Asian Journal of Accounting Research, 2023, vol. 8, issue 4, 400-410

Abstract: Purpose - This research aims to examine the association between political connection and tax aggressiveness during the COVID-19 pandemic and the role of business ethics in the association between political connection and tax aggressiveness. Design/methodology/approach - This study employs a multiple regression method for 147 manufacturing firms listed on the Indonesia Stock Exchange during the pandemic era. Findings - Political connection has no association with tax aggressiveness. However, political connection has a negative (positive) association with tax aggressiveness in more (less) ethical firms. The results are robust after controlling for year-fixed effects, endogeneity issues and other tax aggressiveness measurements. Originality/value - Political connection is often cited as the driver of unethical business, including tax aggressiveness. However, this paper claims and finds that political connection is a double-edged sword. Ethical firms use political connection to reduce their tax aggressiveness, and vice versa. Previous research has paid little attention to this topic. This paper also uses COVID-19 as a natural experiment to highlight the importance of corporate social responsibility activities as business ethics.

Keywords: Political connection; Tax aggressiveness; CSR activities; COVID-19 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajarpp:ajar-04-2023-0113

DOI: 10.1108/AJAR-04-2023-0113

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