The impact of fiscal loss compensation and corporate governance on tax avoidance: The moderating role of foreign share ownership

https://doi.org/10.35912/gams.v2i1.3391
Published: Aug 28, 2025

Abstract:

Purpose: This study examines the influence of fiscal loss compensation and corporate governance, proxied by independent commissioners and the audit committee, on tax avoidance, with foreign ownership as a moderating variable in Indonesian manufacturing companie.

Research/methodology: A quantitative design was applied using purposive sampling of 65 manufacturing companies listed on the Indonesia Stock Exchange during 2020–2024, producing 280 valid observations. Data were collected from financial statements accessed via the IDX and company websites. The analysis employed descriptive statistics, classical assumption tests, multiple regression, and moderated regression analysis (MRA).

Results: The findings reveal that fiscal loss compensation significantly increases tax avoidance, while independent commissioners and the audit committee reduce it. Foreign ownership does not directly affect tax avoidance but moderates the relationships. Specifically, foreign ownership weakens the negative effects of independent commissioners and the audit committee on tax avoidance, whereas it does not moderate the relationship between fiscal loss compensation and tax avoidance.

Conclusions: Corporate governance mechanisms remain crucial in mitigating tax avoidance, but the presence of foreign shareholders creates complex dynamics that may undermine governance effectiveness.

Limitations: The study focuses only on manufacturing firms within a five-year period and relies on secondary data, limiting generalization across industries and contexts.

Contribution: This research contributes to the literature by integrating fiscal loss compensation, corporate governance, and foreign ownership into tax avoidance studies in emerging markets. Practically, the findings offer guidance for policymakers and investors to enhance governance mechanisms and reduce tax avoidance risks.

Keywords:
1. Audit Committee
2. Corporate Governance
3. Fiscal Loss Compensation
4. Foreign Share Ownership
5. Independent Commissioner
6. Tax Avoidance
Authors:
1 . Muhammad Daniel NA
University of Lampung, Bandar Lampung, Lampung, Indonesia
2 . Yuliansyah Yuliansyah
University of Lampung, Bandar Lampung, Lampung, Indonesia
3 . Reni Oktavia
University of Lampung, Bandar Lampung, Lampung, Indonesia
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How to Cite
NA, M. D. ., Yuliansyah, Y., & Oktavia, R. . (2025). The impact of fiscal loss compensation and corporate governance on tax avoidance: The moderating role of foreign share ownership. Global Academy of Multidisciplinary Studies, 2(1), 1–19. https://doi.org/10.35912/gams.v2i1.3391
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Vol. 2 No. 1 (2025): August
Articles
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References

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    Handoyo, S., Wicaksono, A. P., & Darmesti, A. (2022). Does Corporate Governance Support Tax Avoidance Practice in Indonesia?. International Journal of Innovative Research and Scientific Studies, 5(3), 184-201. doi:https://doi.org/10.53894/ijirss.v5i3.505

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  2. Akamah, H. T., Omer, T. C., & Shu, S. Q. (2021). Financial Constraints and Future Tax Outcome Volatility. Journal of Business Finance & Accounting, 48(3-4), 637-665. doi:https://doi.org/10.1111/jbfa.12495
  3. Alkurdi, A., & Mardini, G. H. (2020). The Impact of Ownership Structure and the Board of Directors’ Composition on Tax Avoidance Strategies: Empirical Evidence from Jordan. Journal of Financial Reporting and Accounting, 18(4), 795-812. doi:https://doi.org/10.1108/JFRA-01-2020-0001
  4. Basuki, P. L., & Khalid, Z. (2021). The Influence of Organizational Culture and Working Environment on Employee Performance at PT. Pusaka Ayu Bahari. Reviu Akuntansi, Manajemen, dan Bisnis, 1(1), 21-26. doi:https://doi.org/10.35912/rambis.v1i1.403
  5. Chen, L., Han, M., Li, Y., Megginson, W. L., & Zhang, H. (2022). Foreign Ownership and Corporate Excess Perks. Journal of International Business Studies, 53(1), 72-93. doi:https://doi.org/10.1057/s41267-021-00466-7
  6. Cunningham, L. M., Stein, S. E., Walker, K., & Wolfe, K. (2025). Redefining Perceived Boundaries: Insights into the Audit Committee’s Evolving Responsibilities. The Accounting Review, 100(4), 193-219. doi:https://doi.org/10.2308/TAR-2023-0474
  7. Handoyo, S., Wicaksono, A. P., & Darmesti, A. (2022). Does Corporate Governance Support Tax Avoidance Practice in Indonesia?. International Journal of Innovative Research and Scientific Studies, 5(3), 184-201. doi:https://doi.org/10.53894/ijirss.v5i3.505
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  9. Hsu, P. H., Moore, J. A., & Neubaum, D. O. (2018). Tax Avoidance, Financial Experts on the Audit Committee, and Business Strategy. Journal of Business Finance & Accounting, 45(9-10), 1293-1321. doi:https://doi.org/10.1111/jbfa.12352
  10. Hunger, J. D., & Wheelen, L. (2003). Manajemen Strategis. Yogyakarta: Penerbit Andi.
  11. Jensen, M. C., & Meckling, W. H. (2019). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. In R. I. Tricker (Ed.), Corporate Governance: Values, Ethics and Leadership (pp. 77-132). London: Gower Publishing.
  12. Johannesen, N., Tørsløv, T., & Wier, L. (2020). Are Less Developed Countries More Exposed to Multinational Tax Avoidance? Method and Evidence from Micro-Data. The World Bank Economic Review, 34(3), 790-809. doi:https://doi.org/10.1093/wber/lhz002
  13. Kerr, J. N. (2019). Transparency, Information Shocks, and Tax Avoidance. Contemporary Accounting Research, 36(2), 1146-1183. doi:https://doi.org/10.1111/1911-3846.12449
  14. Khalik, A., & Sylvia. (2022). Dimensions of Earnings Management in Transportation Service Companies in Indonesia. Jurnal Akuntansi, 26(1), 44-60. doi:https://doi.org/10.24912/ja.v26i1.816
  15. Khalil, M., Ozkanc, A., & Yildiz, Y. (2020). Foreign Institutional Ownership and Demand for Accounting Conservatism: Evidence from an Emerging Market. Review of Quantitative Finance and Accounting, 55(1), 1-27. doi:https://doi.org/10.1007/s11156-019-00834-3
  16. Kharislam, D. D., Pravasanti, Y. A., & Ningsih, S. (2022). Pengaruh Pelayanan, Kualitas Produk, dan Lokasi Terhadap Keputusan Pembelian.(Studi Kasus pada Indomaret Ruko Garuda Mas). Jurnal Akuntansi dan Pajak, 22(2), 764-771.
  17. Lawati, H. A., & Hussainey, K. (2021). Do Overlapped Audit Committee Directors Affect Tax Avoidance?. Journal of Risk and Financial Management, 14(10), 1-14. doi:https://doi.org/10.3390/jrfm14100487
  18. Lutfi, A., Alkilani, S. Z., Saad, M., Alshirah, M. H., Alshirah, A. F., Alrawad, M., . . . Ramadan, M. H. (2022). The Influence of Audit Committee Chair Characteristics on Financial Reporting Quality. Journal of Risk and Financial Management, 15(12), 1-15. doi:https://doi.org/10.3390/jrfm15120563
  19. Maisaroh, S., Tjaraka, H., & Rahmiati, A. (2024). Dominasi Asing dalam Agresivitas Pajak di Indonesia. Owner: Riset dan Jurnal Akuntansi, 8(2), 1539-1548. doi:https://doi.org/10.33395/owner.v8i2.1991
  20. Napitupulu, I. H., Situngkir, A., Basuki, F. H., & Nugroho, W. (2023). Optimizing good Corporate Governance Mechanism to Improve Performance: Case in Indonesia’s Manufacturing Companies. Global Business Review, 24(6), 1205-1226. doi:https://doi.org/10.1177/0972150920919875
  21. Nguyen, T. L. A., & Le, T. B. N. (2025). Ownership Structure and Tax Avoidance in Vietnam's Listed Securities Firms: The Moderating Role of Foreign Directors, Firm Leverage, and the COVID-19 Pandemic. Asian Journal of Economic Modelling, 13(1), 73-84. doi:https://doi.org/10.55493/5009.v13i1.5362
  22. Nisa, S., & Hariyanti, A. I. (2022). Good Corporate Governance, Kinerja Keuangan dan Kinerja Saham Selama Pandemi Covid-19. Jurnal Studi Pemerintahan dan Akuntabilitas, 2(1), 51-64. doi:https://doi.org/10.35912/jastaka.v2i1.1739
  23. Oktaviani, R. M., Wulandari, S., Srimindarti, C., & Ma'sum, M. A. (2023). The Impact of Corporate Governance and Fiscal Loss Compensation on Tax Avoidance Policies: Indonesian Banking Sector. International Journal of Sustainable Development & Planning, 18(11), 3641-3647. doi:https://doi.org/10.18280/ijsdp.181130
  24. Putri, D. B. K., & Damayanti, T. W. (2021). Penghindaran Pajak: Efek Struktur Kepemilikan Asing dan Preferensi Risiko CEO & CFO. Akuntansi Bisnis & Manajemen (ABM), 28(1), 11-24. doi:https://doi.org/10.35606/jabm.v28i1.807
  25. Putri, V. R., Zakaria, N. B., Said, J., & Azis, M. A. A. (2023). Do Foreign Ownership, Executive Incentives, Corporate Social Responsibility Activity and Audit Quality Affect Corporate Tax Avoidance?. Indian Journal of Corporate Governance, 16(2), 218-239. doi:https://doi.org/10.1177/09746862231205648
  26. Rahma, R. A., & Firmansyah, A. (2022). Does Independent Commissioner Have a Role in the Relationship between Sustainability Disclosure, Debt Policy, and Tax Avoidance?. Journal of Contemporary Accounting, 4(2), 65-79. doi:https://doi.org/10.20885/jca.vol4.iss2.art1
  27. Saputra, R. A., Zahra, F., & Sundary, R. I. (2024). Sistem Self Assessment dalam Pembayaran Pajak Penghasilan. Jurnal Pendidikan Tambusai, 8(2), 27887-27891.
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  30. Syukur, M., Marzuki, M. M., & Zakaria, M. (2022). Ownership Structure and Tax Avoidance in Asia: a Systematic Literature Review and a Research Agenda. Journal of Tax Reform, 8(2), 170-185. doi:https://doi.org/10.15826/jtr.2022.8.2.115
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  32. Velte, P. (2024). Ownership Structure and Corporate Tax Avoidance: A Structured Literature Review on Archival Research. Journal of Applied Accounting Research, 25(3), 696-731. doi:https://doi.org/10.1108/JAAR-10-2022-0259
  33. Wahab, E. A. A., Wardani, D. A. K., Harymawan, I., & Nasih, M. (2024). Military Connections, Corporate Governance and Corporate Tax Avoidance. Pacific Accounting Review, 36(3/4), 348-373. doi:https://doi.org/10.1108/PAR-03-2023-0033
  34. Watts, R. L., & Zimmerman, J. L. (1978). Towards a Positive Theory of the Determination of Accounting Standards. Accounting review, 53(1), 112-134.
  35. Watts, R. L., & Zimmerman, J. L. (1986). Positive Accounting Theory. The Accounting Review, 66(1), 131-156.
  36. Wen, Cui, H., & Ke, Y. (2020). Directors with Foreign Experience and Corporate Tax Avoidance. Journal of corporate finance, 62. doi:https://doi.org/10.1016/j.jcorpfin.2020.101624
  37. Yantri, O. (2022). Pengaruh Return on Assets, Leverage dan Firm Size terhadap Tax Avoidance pada Perusahaan Sektor Energi yang Terdaftar di Bursa Efek Indonesia Tahun 2016-2021. Reviu Akuntansi, Manajemen, dan Bisnis, 2(2), 121-137. doi:https://doi.org/10.35912/rambis.v2i2.1530