The Influence of The Firm’s Size on Income Tax with The Disclosure of Corporate Social Responsibility as Mediating Variabl

Narakrisna, Fransiskus Xaverius Arista and Purwaningsih, Anna (2013) The Influence of The Firm’s Size on Income Tax with The Disclosure of Corporate Social Responsibility as Mediating Variabl. Jurnal Ekonomi Akuntansi. p1-14.

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Abstract

Abstract This research aims at finding the empirical proof of the firm’s size impact on income tax, by considering CSR as mediating variable. This research is crucial to conduct since Juli 2007 Indonesia became the first country to introduce mandatory legal requirements for CSR when the Indonesia parliament passed Law 40/2007. Based on this Law, CSR turns into the company’s expense. Meanwhile, in taxation principles, the are types of expense which can be reduced to minimize the company’s tax. Therefore, this research is directed to answer if CSR is closely related to company’s tax planning. The research samples were manufacture companies listed in Indonesia Stock Exchange in 2011. The total numbers are 79 companies. This research employed a model wherein independent variable (firm size) did not show direct connection with dependent variable (income tax). The test of the hypothesis employed regression and Sobel tests. The variable of firm’s size was proxied with the value of market capitalization. CSR variable was measured based on the numbers of report on company’s social and ecological responsibility which was in line with economic performance indicator GRI 3.1. which was revealed in annual report and/or sustainability report. The variable of the income tax was proxied by CTTOR (Corporate Tax to Turn Over Ratio). This ratio was used to know the unpayed income tax in one year relative to the sale performed by the company. The result shows that (1) the firm’s size influences CSR disclosure; (2) CSR disclosure influences the income tax; and (3) CSR disclosure is a mediating variable in term of firm’s size to income tax. This means that CSR realization is not independent from company’s tax planning. In other words, the realization of CSR considers taxation principles related to deductible and nondeductible expenses.

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