CORPORATE GOVERNANCE AND TAX AVOIDANCE

FAJAR IZZA FAHMI (fajar.izza@yahoo.com)TRISNINIK RATIH WULANDARI (trisninik_rw@yahoo.com)

JULIATI (juliati.qodrian@gmail.com)

UNIVERSITAS SEBELAS MARET

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CORPORATE GOVERNANCE AND TAX AVOIDANCE

ABSTARCT

This study aims to examine the effect of corporate governance on the extent of tax avoidance.

Elements of corporate governance that are used to test are ownership structure, independent commissary

proportion, audit committee and audit quality.Type data that used by this study is secondary data that

aim form each company website. Under purposive sampling, 108 companies annual report are selected

from 2012 to 2015 that listed on Indonesian Stock Exchange. Multiple regression analysis is used to test

the hypothesis in this research.The results indicated that audit quality has a positve influence the activity

of tax avoidance, institutional ownership and audit committee had a negative effect, while proportion of

independent commissioner has not effect on tax avoidance.

Keywords: corporate governance, independent commissary proportion, audit committee, audit quality,

tax avoidance, book tax gap.

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BACKGROUND OF STUDI

For the countries in this world taxes are an important and even most important element in order to sustain the state budget. Therefore the governments of the countries of the world pay more attention to the tax sector. Tax is one of the largest sources of state revenues. Every taxpayer is required to participate so that the growth rate and implementation of national development can work well for the sake of the welfare of the state.

Research conducted by Business Roundtable and Pricewaterhouse Coopers UP (PwC) found the fact that the effective tax rate (ETR) to be paid by global companies in Indonesia is the fourth most expensive in the world after Japan, Morocco and Italy ( Nugroho, 2011) Indonesia's effective tax ratio of 28.1% is fourth, after Japan (33.8%), Morocco (33.9%) and Italy (29.1%), compared to the state - Asean's position, Indonesia's position is so bad that Indonesia is implementing tax reform in 2009 to reduce tax rates in order to compete in attracting investors to invest in Indonesia (Zulkarnaen, 2015) .The condition is used by companies to find a gap with minimize the tax burden by tax avoidance Tax avoidance is a tax planning that is still in the corridor Act This activity is one of tax avoidance which is solely done to minimize corporate tax liability.

The company always strives to improve its survival (Sumomba, 2013). This is done so that the company is able to develop its business and share dividends to shareholders (Sumomba, 2013). Any form of business development that occurs within the company can easily happen if the company implements good corporate governance. Therefore, corporate governance becomes an important concern for the company in running its business

The Forum for Corporate Governance in Indonesia (FCGI, 2001: 1) defines corporate governance, derived from the definition of the Cadburry Committee, a set of rules governing relationships between shareholders, managers, creditor, government, employees and internal and external stakeholders others relating to their rights and obligations, or in other words a system that regulates and controls the company. Corporate governance is an internal governance of a company that explains a series of relationships between various participating parties to determine the direction of the company's performance.

The issue of corporate governance began to emerge, especially in Indonesia in 1998 when Indonesia experienced a prolonged crisis. Many parties say that the length of the process of improvement in Indonesia is caused by the very weak corporate governance applied in companies in Indonesia. Since then, both government and investors have begun to pay significant attention to corporate governance practices (Annisa & Kurniasih, 2012). In 1999 the National Committee on Governance Policy was established and issued a Guidance on Good Corporate Governance which has improved in the following years. The implementation of Corporate Governance is expected to encourage several things, one of which is to encourage company management to be professional, transparent and efficient, and to optimize the functions of the Board of Commissioners, Board of Directors and General Meeting of Shareholders (Irawan & Farahmita, 2012).

The mechanisms in corporate governance oversight are internal and external. The Internal Mechanism is a way of controlling a company using internal structures and processes such as General Meeting of Shareholders (AGMS), Board composition, Board of Commissioners proportions and meetings with the board of directors. While external mechanisms are such as control by the company, ownership structure, and market control (Fadhilah, 2014). The successful implementation of corporate governance will depend heavily on the strength of securities and corporate law, sound accounting standards, strong rules, an efficient judicial system, and a strong determination to fight corruption. In this case management plays an important role in choosing a strategy by the company to increase wealth.

Several previous studies on the influence of corporate governance on Tax Avoidance using independent variables such as institutional ownership, independent commissioners, number of boards of commissioners, audit quality, audit committee on tax avoidance as the dependent variable. Institutional ownership by Fadhilah (2014) is a shareholding of a company by an institution or institution that has a

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large interest in investments made including stock investments. Some research results using institutional ownership variables are Fadhilah (2014), Winata (2014), Khoirunnisa (2014), Sandy and Lukviarman (2015), Dewi and Sari (2015) indicating that this variable has no significant effect on tax avoidance . Meanwhile, according to research Putranti and Setiawanta (2015), Maharani and Setiawanta (2014) showed the results of institutional ownership negatively affect tax avoidance.

Indonesia Stock Exchange (Pohan. 2008). Some research using Independent Commissioner that is Sabli and Noor (2012), Fadhilah (2014), Dewi and Sari (2015), Tendean (2015) Fajri et al. (2015) indicates that an independent Commissioner is defined as an unaffiliated person in all respects with the controlling shareholder, has no affiliation relationship with the board of directors or the board of commissioners and does not serve as a director in a company related to the company owner under the rules issued by an independent commissioner has no significant effect. But research conducted by Winata (2014) Agung Wibawa et al (2016) concluded that independent commissioners positively influence tax avoidance.

Audit quality is any possibility that may occur when auditing the client's financial statements and find fault violations and report them in audited financial statements (Maharani and Suardana, 2014). Audits conducted by auditors can be said to be qualified if they meet the requirements or auditing standards. Several studies using Quality Audit are Annisa and Kurniasih (2012), Putranti and Setiawanta (2014), Sari and Dewi (2014), found the same result that audit quality affects tax avoidance significantly and positively, but unlike research conducted by and Fadhilah (2014), Maharani and Suardana (2014), Sandi and Lukviarman (2016), Khoirunnisa (2015) Agung Wibawa et al (2016) concluded that audit quality negatively affects tax avoidance. While Fajri et al. (2015), Winata (2014), concluded it had no significant effect.

The definition of the audit committee according to the Indonesian Audit Committee (IKAI) is a professional and independent working committee that is assisted by the board of commissioners. According to Annisa and Kurniasih (2012), the audit committee serves as the supervisor of the process of preparing financial reports and internal controls, because the Indonesia Stock Exchange requires all issuers to form and have an audit committee headed by an independent commissioner. Some studies that use audit committee are Annisa and Kurniasih. (2012), Fadhilah (2014), Winata (2014), Tendean (2015), Agung Wibawa et al (2016) stated that audit committee had a significant positive effect on tax avoidance. But research conducted by Maharani and Suardana (2014), Sandi and Lukviarman (2016), indicates audit committee has a significant negative effect on tax avoidance. While Putranti and Setiawanta (2014), Sari and Dewi (2014) and Fajri et al. (2015) which concluded that the audit committee had no effect on tax avoidance.

From the above research there are still various results. For that, interested researchers want to examine more about the influence of corporate governance to tax avoidance. The purpose of this study is to obtain empirical evidence of corporate governance influence on tax avoidance at manufacturing companies listed on the Indonesia Stock Exchange.

LITERATUR REVIEWAgency Theory

The agency theory is a contract that occurs between principal and agent. Jensen and Meckling (1976) explain that agency relationships will arise when the principal employs another person (agent) to provide a service and then delegates authority over management and decision making to the agent. Principal is a shareholder or investor, while agent is a management or individual who manages the company.

Jensen and Meckling (1976) explain that the underlying agency relationship between agent and principal is the separation of ownership or management by agents to improve the welfare of the principal company owners. Anggit and Shodiq (2014) explains that the separation of ownership or task function performed by agent and principal will cause agency conflict that occurs in both.

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Ujiyantho and Pramuka (2007) explained that the increased conflict occurs because agents do not always do according to the principal want, thus causing agency cost (agency fee). Agency costs consist of 3 types, namely (1) costs associated with the monitoring function of the agent (monitoring cost), (2) the cost to ensure that the agent will act in accordance with the wishes of the owner or bonding cost, and (3) ) reduced ownership welfare as a result of policy differences between owner and management or residual loss

The second conflict occurs because the principal basically does not always supervise the agent activity in managing management within a company, so the agent often provide information that is not in accordance with what happened to the actual situation within the company. Investors sometimes do not fully know the conditions that occur, so many misunderstandings resulting from lack of information because of the conflict. Anggit and Shodiq (2007) explained that in the process of management and management of the company, agent manager or a party who better understand the state of the company than the shareholders or principal, the situation is referred to as information asymmetry.

Scott (2012), information asymmetry is divided into 2 types, namely: (1) management has more information from outside parties (adverse selection), (2) management understand about all activities within the company, while outsiders are not (moral hazard). Therefore, managers sometimes always provide information that is not in accordance with the actual reality within the company solely to benefit his own interests.

Management of company in practice tends to act opportunistically so the results sometimes do not match what is expected by stakeholders such as shareholders, investors or owners disebuah company. Agent as the manager of the company management will take the action of earnings management in order to show the existence of the achievement in terms of increasing corporate profits. One of the mechanisms expected to control this conflict is corporate governance

Anggit and Shodiq (2007) describes corporate governance as a management mechanism based on agency theory. By applying the good corporate governance method to the company, the principal can give trust to the agent as the management in the principal wealth management, and the principal will be more confident that the agent will not cheat which will harm both parties. In addition, the implementation of good corporate governance is a step taken by the company in the context of monitoring management in running business activities within the company.

Corporate GovernanceAccording to the Decree of the Minister of State-Owned Enterprises No. KEP 117/M-MBU/2002 on

the implementation of Good Corporate Governance practices in state-owned enterprises, the Corporate Governance is a process and structure used by SOE organs to improve business success and accountability of companies realizing shareholder value over the long term by taking into account the interests of other stakeholders, based on legislation and ethical values. Desai and Dharmapala (2007) argued that good corporate governance is definitively a system that regulates and controls the company to create value added for all stockholders. This understanding is clarified by Isgiyarta and Triartiarini (2005) defines corporate governance as a set of regulatory tools governing the linking of shareholders, managers of companies, creditors, government employees, and other internal and external stakeholders with respect to rights and duties they or in other words a system that regulates and controls the company.

Corporate governance is defined as a system that regulates and controls the company that is expected to provide and increase the value of the company to shareholders.The presence of a good corporate governance for the company will support the company's operational activities (Haruman 2008.). Good corporate governance mechanisms are related to the prosperity of the company and shareholders, so that its application is expected to contribute positively to the company as a whole.

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Measurement of Corporate GovernanceIn Indonesia Corporate Governance Index has been developed by Indonesian Institute for

Corporate Governance (IICG). IICG's Corporate Governance rating is not performed for all companies listed on the Indonesia Stock Exchange, so the research sample is limited (Kurniasih and Siregar, 2007). The variable used as a proxy for corporate governance in some studies, is the institutional ownership structure. The proxy used to measure the board structure is used by the number of boards of commissioners and the percentage of independent board of commissioners, the number of audit committees, while for transparency of information is audit quality (Mayangsari, 2003).

Institutional ownershipInstitutional ownership is the ownership of shares owned by institutions such as insurance, banks,

investment companies and ownership of other institutions (Tarjo 2008). Institutional ownership has a vested interest in investments including stock investments. So the institution usually assigns responsibility to a certain division to manage the company's investment. The existence of an institution that professionally monitors the development of its investment causes the level of control over management actions so high that the potential can be suppressed (Fadhilah, 2014). Institutional ownership is important in monitoring management because institutional ownership will increase more optimal supervision as it is capable of effectively monitoring every decision taken by managers. With the high level of institutional ownership, the greater the level of supervision to managers and can reduce conflicts of interest between management.

Bushee in Boediono (2005) argues that institutional ownership has the ability to reduce the incentives of self-serving managers through intense levels of scrutiny. Institutional ownership may suppress the tendency of management to utilize discretionary financial reports to provide reported earnings quality. Institutional ownership has the ability to control the management through an effective monitoring process, thereby reducing management actions to earnings management. Percentage of certain shares owned by the institution may affect the process of preparing financial statements that do not rule out the existence of accrualization in accordance with the interests of the management.

Board of Commissioners StructureAn independent commissioner is defined as an unaffiliated person in all respects with the

controlling shareholder, has no affiliation relationship with the board of directors or the board of commissioners and does not serve as director of a company related to the company owner under the rules issued by the Indonesia Stock Exchange, the number of independent commissioners proportionate to the number of shares owned by shareholders who do not play a controlling role with the provision of an independent commissioner amounting to at least thirty percent (30%) of all members of the Board of Commissioners, in addition the independent commissioner understands the laws and regulations on the capital market and is proposed by a shareholder who is not a controlling shareholder in the General Meeting of Shareholders (Pohan, 2008). Siallagan and Machfoedz (2006) argue that the role of board of commissioners is also expected to improve the quality of earnings by limiting the level of earnings management through the monitoring function of financial reporting. The monitoring function undertaken by the board of commissioners is influenced by the number or size of the board of commissioners, so in his research Siallagan and Machfoedz use the proxy of the board of commissioners to measure corporate governance.

Audit QualityAudit is an important element in corporate governance that is closely related to one of the principles

of corporate governance that is transparency. Public companies are increasingly demanding transparency in financial statements. Sartori (2008) explains, Good Corporate Governance that both provide alignment of interests and transparency will prevent managers involved in dealing with tax avoidance strategies. The importance of an audit is to ensure that the financial statements fit the actual conditions. The financial

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statements audited by KAP auditors affiliated with KAP The Big Four according to some references are believed to be of higher quality so as to showcase actual company value, therefore the companies audited by KAP The Big Four (PriceWaterhouseCooper - PWC, Deloitte Touche Tohmatsu, KPMG, Ernst and Young-EdanY) have a lower fraud rate than firms audited by KAP that are not affiliated with the Big Four KAP.

Audit Committee

Winata (2014) says the audit committee is a group of people selected from the board of commissioners who are responsible for overseeing the financial reporting and disclosure process. Audit committee has an important role as a corporate organ that absolutely must exist in the implementation of corporate governance. According to Sandi and Lukviarman (2015) in general, this committee serves as the supervisor of the process of making financial reports and internal supervision, because the Indonesia Stock Exchange requires all issuers to form and have an audit committee chaired by independent commissioners.

According to the Decision of the Chairman of BAPEPAM and LK Number: Kep-643/BL/2012, states that the Audit Committee is a committee established by and responsible to the Board of Commissioners in assisting in carrying out the duties and functions of the Board of Commissioners. The decree states that the audit committee shall consist of at least 3 (three) members who are from independent commissioners and outside parties of issuers or public companies.

Tax AvoidanceIn the National Tax Law, taxes are dues or charges are compulsory for the people to the state under

the laws and do not get the direct rewards used in financing all expenses. According to Mardiasmo (2011) tax is the contribution of the people to the state coffers based on the Act (which is forced by not receiving lead directly)

Minimize the tax burden can be done in various ways, ranging from that still in the frame of taxation regulations to violate the rules of taxation. Efforts to minimize taxes euphemism is often referred to as tax planning (tax planning). Generally tax planning refers to the process of engineering business and taxpayer transactions so that tax debt is in the minimal amount but still in the frame of tax regulations (Suandy, 2008).

The desire of the taxpayers to not comply with tax regulations makes the existence of the tax resistance they provide. Resistance to tax can be divided into two, namely: passive resistance and active resistance. Passive resistance is a barrier that complicates tax collection and has a close relationship with economic structure. While active resistance is all business and deed directly addressed to the government (fiskus) in order to avoid tax (Sumarsan, 2010)

In making tax savings illegally can be done through tax management. Minimize tax liability can be done in various ways, both those that still meet the provisions of taxation and those that violate tax laws. The most commonly used term is tax evasion and tax avoidance. Tax evasion by violating the provisions of tax regulations is called tax evasion whereas according to Dewi and Sari (2015) Tax avoidance is an effort to avoid taxes by fulfilling the taxation provisions and using the strategy in the field of taxation used. Tax evasion is done because many corporate and personal taxpayers feel burdened to pay taxes. Based on this the taxpayer seeks to alleviate the tax payment obligation by minimizing the amount of tax payable.

Previous researchTimothy (2010) conducted a study on the influence of corporate governance on tax aggressiveness

in Hongkong Stock Exchange with sample data 100. Tax aggressiveness in this study was measured using effective tax rate. Corporate governance is proxied using share ownership, the largest percentage of shareholders, the percentage of minority shareholders and the tax rate. These results indicate that

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shareholdings by directors, independent directors, and percentage of the largest shareholders have a significant relationship with corporate tax aggressiveness.

Annisa and Kurniasih (2012) examine the effect of corporate governance on tax avoidance using institutional ownership variables, board of commissioners, audit quality, audit committee. Sample data from 2008 on Indonesia Stock Exchange. The results showed no significant influence between institutional ownership, the composition of independent board of commissioner, board of commissioner against tax avoidance. Audit Committee and audit quality influence tax avoidance.

Sabli and Noor (2012) analyzed the relationship between corporate governance and tax planning using data of 397 registered companies during 2007-2010, with the proportion of dependent board members and institutional ownership of CETR (corporate effective tax rate). The results showed that found a not significant relationship between corporate governance with CETR.

Maharani and Suardana (2014) analyzed the effect of corporate governance, profitability and executive characteristics on tax avoidance. The results showed that the proportion of the board of commissioners, audit quality, audit committee which is the proxy of corporate governance and ROA which is the proxy of profitability have a negative effect, the company's risk which is the proxy of the executive character has positive effect, while the rest is the institutional ownership which is the proxy of the corporate governance does not affect the tax avoidance actions undertaken by manufacturing companies in Indonesia Stock Exchange period 2008-2012.

Fadhilah (2014) conducted research on the influence of corporate governance on tax avoidance at companies listed in Indonesia Stock Exchange period 2009-2011. The results showed that the influence of corporate governance based on the proportion of institutional ownership, the Independent Board of Commissioners has no effect on tax avoidance, the quality of audit has a negative effect and audit committee significantly influence.

Tendean (2014) examines the effect of good corporate governance and firm size on tax avoidance. The sample of research used in the manufacturing company for 2010-2013 period concluded that audit committee existence significantly influence tax avoidance so that more audit committee amount will reduce tax avoidance action. While institutional leadership, auditor independence and firm size have no effect in reducing tax avoidance measures. Variable institutional ownership, auditor independence, audit committee and company size together influence tax avoidance.

Putranti and Setiawanta (2014) examined the effect of institutional ownership, board structure, audit quality and audit committee on tax avoidance at companies listed on Indonesia Stock Exchange in 2013. It was concluded that institutional ownership had negative effect, number of board of commissioners and quality audit has a positive effect. While other variable percentage of independent board of commissioner and variable of audit committee amount have no effect to tax avoidance.

Winata (2014) in his research at a company listed on the Indonesia Stock Exchange in 2013 stated that corporate governance is the percentage of independent board of commissioners and the number of audit committee significantly influence tax avoidance activities proxied by book tax gap. The results of this study also indicate that tax avoidance activities are not significantly affected by institutional ownership, and audit quality.

Khoirunnisa (2015) analyzed the effect of corporate governance on tax avoidance on manufacturing firms in Indonesia Stock Exchange period 2011-2013. In this study independent commissioners and audit quality have a significant effect on tax avoidance action. This study shows that there is a positive correlation between tax aggressiveness and aggressiveness of financial reporting of the research increasingly shows that independent commissioner and audit quality closely related to tax avoidance.

Sandy and Lukviarman (2015) in his research on the influence of corporate governance on tax avoidance in the period 2011-2013 showed that institutional ownership has no positive effect. The proportion of independent commissioners has a negative and significant effect, the quality of audit has a negative and significant influence, the audit committee has a significant negative effect on tax avoidance.

Dewi and Sari (2015) examines the effect of executive incentives, corporate risk and corporate governance on tax avoidance. The number of samples analyzed were 165 samples of manufacturing companies listed on Indonesia Stock Exchange 2011-2013. The result of this analysis concludes that

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corporate risk negatively affects tax avoidance. The higher the corporate risk, the tax avoidance will be lower. Executive incentives, institutional ownership, independent commissioners, and audit committees have no effect on tax avoidance.

Fajri et al. (2015) examines the influence of corporate governance, profitability and executive character on tax avoidance at companies listed on the Indonesia Stock Exchange 2012-2014. The study resulted in the conclusion that the proportion of independent board of commissioners, audit quality, audit committee did not significantly influence tax avoidance. while return of asset and executive character have significant effect to tax avoidance.

Wibawa et al. (2016) in his research conducted on the study companies listed in the Sri Kehati Exchange Index 2010-2014 resulted in the conclusion that there is a significant positive influence between the percentage of the board of commissioners and the audit committee of the company against tax evasion. While the external auditor quality results do not negatef significant influence on tax avoidance.

The Effect of Institutional Ownership on Tax Avoidance.Companies with greater ownership of shares owned by other companies or government institutions,

the performance of the management company to be able to earn profits in accordance with the desired will tend to be supervised by institutional investors. It encourages management to minimize the tax value owed by the company. Research conducted by Shafer and Simmons (2006) determines that institutional ownership plays an important role in monitoring, disciplining and influencing managers in tax management.

The above research is supported by Khurana and Moser (2009) which concludes that the large or small concentration of institutional ownership will influence the company's tax avoidance policy, and the large concentration of institutional ownership will influence the tax avoidance policy by the company, and the greater the concentration of institutional shareholder shortterm will increase tax avoidance policy, but the greater the concentration of long-term shareholder ownership will further reduce the aggressive tax policy action.H1: Institutional ownership positively affects tax avoidance.

Effect of Independent Commissioner on Tax Avoidance.Independent board members play a role in overseeing the running of other executive roles, where

there is no oversight from independent commissioners, the more likely it is that other executives can manipulate their own position by gaining full control over the remuneration that may adversely affect shareholders. Nasution and Setiawan (2007) argued that the more independent commissioners, the supervisory process is made more qualified by the presence of independent parties in the company that will be more demanding transparency of corporate financial reporting. The above is supported by research results Winata (2014) and Wibawa et al. (2016) proves that independent commissioners have a positive influence on tax avoidance and tax evasion management is often opportunistic in that they have a motive to maximize net income in order to increase bonuses. Profit has been used as a major indicator of the success of managers.H2: The percentage of the Board of Commissioners has a positive effect on tax avoidance.

Effect of Audit Quality on Tax Avoidance.One of the key elements of corporate governance is transparency. Transparency to shareholders can

be achieved by reporting matters relating to taxation on capital markets and shareholder meetings. High-level auditors are expected to prevent actions that benefit certain parties. High quality auditors are often assumed to be able to prevent and reduce questionable accounting practices and report material mistakes and irregularities rather than low quality auditors (Nastiti and Gumanti, 2011). The Big Four KAP Auditor according to some references is believed to be more qualified to display actual company value, therefore the companies audited by KAP The BigFour (Price Waterhouse Cooper - PWC, Deloitte Touche Tohmatsu, KPMG, Ernst and Young-EdanY) which is lower than that of companies audited by KAP non

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The Big Four (Khoirunnisa, 2015). Companies with weak internal governance mechanisms tend to choose auditors of low quality. This is done so that the main owner of the company is able to maintain the benefits obtained through the weakness of corporate financial transparency because the function of auditors only to test the fairness of financial statement information of a company.H3: Audit quality has a positive effect on tax avoidance.

Effect of the Audit Committee on Tax Avoidance.The audit committee is a person or group of persons of at least three independent persons in an

independently chosen company with capabilities and competencies in accounting and finance (Pohan 2008). Audit committee is responsible for controlling managers in improving profit growth where managers tend to emphasize the costs, especially taxes, which will encourage companies to avoid taxes. This is in line with Fadhilah's (2014) study indicating that audit committee has a positive effect on tax avoidance of the company. While research Sandi and Lukviarman (2015) states a negative regression coefficient indicates a tendency that the existence of audit committees less effective to improve the integrity of financial statements. Thus, if the number of audit committees in a company is not in accordance with the rules of BEI it will increase management actions in minimizing profit for tax avoidance.H4: Audit Committee negatively affects tax avoidance

RESEARCH METHODS

Types and Data Collection TechniquesThe data used in this research is secondary data of manufacturing companies listed in Indonesia

Stock Exchange 2012 until 2015. Secondary data is information gathered from various existing sources (Sekaran, 2013). The data used in the form of financial statements. Data obtained from the website www.sahamok.com and from other sources that support and can be justified truth.

Population and SampleThe population is a group of people, events, or things that the investigator intends to investigate

(Sekaran, 2013). The data population used in this study are all manufacturing companies listed on the Indonesia Stock Exchange during the period 2012-2015. Sampling technique used pursuant to purposive sampling for conditional samples determined by certain criteria. Purposive sampling is sampling with certain considerations based on convenience sampling and judgment sampling (Suharyadi and Purwanto, 2009). Company criteria used as sample of this research are as follows: Manufacturing companies that have been listed (listing) on the Indonesia Stock Exchange during the period 2012-2015.a. The Company publishes its consolidated financial statements for the period 2012-2015.b. Companies that do not submit the complete data / information required during the period 2012-2015.c. Manufacturing companies issuing financial statements in rupiah have been audited.

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Table 3.1Sample and Observation Research

Information Number of Companies

1. Manufacturing companies listed on the Indonesia Stock Exchange during the period 2012-2015.

145

2. Companies that do not publish the company's consolidated financial statements for the period 2012-2015

(16)

3. The Company did not submit the complete data / information required during the period 2012-2015

(65)

4. Manufacturing companies that issue financial statements are not stated in rupiah units audited

(37)

The number of samples in the study 27Number of years of research 4Number of research observations 108Source: Secondary data processed, 2017

Identification and Measurement of Research Variables

Dependent Variable In this study the dependent variable is the tax avoidance of manufacturing companies. Tax avoidance measurements are measured using a gap proxy or different from accounting profit and fiscal profit (book tax gap). In calculating the book tax gap, a simple mathematical calculation of profit before tax is applied in the commercial income statement to the company's fiscal profit. BTG used in this study symbolizes the book tax gap.

Independent Variables In this study the independent variables are institutional ownership, number of boards of commissioners, audit quality, audit committee.

1. Institutional ownershipAccording to Khurana and Moser (2009) the size of institutional ownership will affect the aggressive policies undertaken by the company. In this study institutional ownership is measured using the percentage of shares held by the institutional at the end of the year compared to the number of shares outstanding in the company. This variable is denoted by INST

2. Independent board of commissioners In this study variable number of board of commissioner also proxies degan percentage existence of independent board of commissioner in a company to total amount of board of commissioner as proxy corporate corporate (Mayangsari, 2003). The independent percentage of independent board of commissioners is denoted by INDP.

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3. Audit qualityAudit quality measurement based on the size of the Public Accounting Firm that conducts an audit on a company. Companies that use the Big Four KAP services in auditing their financial statements in this study will be rated 1, if unaudited by KAP The Big Four will be rated 0. In this study the audit quality is denoted by AUDIT.

4. Audit committeeThe presence of audit committees is expected to provide insight into issues related to financial policy, accounting and internal control (Mayangsari, 2003). In this study used the number of audit committees in a company as a measuring tool and denoted by the COMMITE

Hypothesis TestingData analysis method used in this research is multiple regression model to test the influence of

independent variable to dependent variable. In accordance with kerka research and testing the hypothesis above, then the hypothesis will be tested with the following regression equation:

BTG = a0 + a1INST + a2INDP+ a3AUDIT+ a4 COMMITE

BTG = Book tax gap

INST = Institutional ownership

INDP = Independent board of commissioner

AUDIT = Audit quality

COMMITE = Audit committee

€ = error term

RESULTS AND DISCUSSION

Data Description

The results of descriptive analysis of each variable in this study in detail can be seen in the table below.

Table 4.1.Descriptive Statistics Results

Variabel Minimum Maximum Mean Std. DevBTG -6383213123 30218286673 499462140,07 4043695848,297INST 0,0512 0,9322 0,4902113 0,3669575INDPAUDITKOMITE

0,2001

0,7515

0,39400,313,05

0,122920,4670,647

Source: Secondary data processed, 2017

Descriptive statistics of book tax gap (BTG) on manufacturing companies that go public in Indonesia Stock Exchange known that the amount of data available in this study that is as much as 108

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data with valid N or data processed as much as 108 and N missing or unprocessed data as much 0. Mean or average book tax gap in 2012-2015 amounted to 499462140,07. Standard deviation of 4043695848,297 from the result of standard errors of mean can be determined the range of minimum and maximum population data. Book tax gap of manufacturing companies listed in Indonesia Stock Exchange minimum in 2012-2015 amounted to -6383213123, while the maximum ratio of 30218286673.

Descriptive statistical results INDP on manufacturing companies that go public in Indonesia Stock Exchange known that the amount of data in the company that is as much as 108 data with valid N or data processed as much as 108 and N missing or data not processed as much as 0. Mean INDP in year 2012-2015 of 0.3940, with a standard deviation of 0.12292 from the result of standard errors of mean can be determined the range of minimum and maximum INDP population data. The minimum ratio of INDP in 2012-2015 is 0.20, while the maximum ratio of INDP is 0.75.

Descriptive statistical results AUDIT on manufacturing companies that go public in Indonesia Stock Exchange known that the amount of data entered as much as 108 data with N valid or processed data as much as 108 and N missing or data not processed as much 0. The amount of data manufacturing companies listed in Indonesia Stock Exchange 2012-215 in this study using the auditor The Big Four there are as many as 34 data and using non The Big Four auditor there are 74 data. Thus it can be seen that the majority of AUDIT in this study is Non The Big Four.

Descriptive statistics results of COMMITTEES at manufacturing companies listing in Indonesia Stock Exchange known that the amount of data entered as many as 108 companies with valid N or data processed as much as 108 and N missing data as much as 0. Mean or average AUDIT in 2012-2015 as much 3.05 with standard deviation of 0.647 from the standard errors of mean can be determined the range of minimum and maximum population data. The minimum AUDIT ratio in 2012-2015 amounts to 1, while the maximum AUDIT ratio is 5.

Data AnalysisCoefficient of Determination(R2)

Based on the results of the print out, it can be seen that the adjusted R Square (R2) in this study amounted to 0.145. So it can be interpreted that the variation of independent variables consisting of INST, INDP, AUDIT and KOMITE to BTG at manufacturing companies listed in Indonesia Stock Exchange 2012-2015 period of 14.5% while the rest of 85.5% influenced by other factors. So it can be seen that the selection of variables that can affect tax avoidence on manufacturing companies listed on the Indonesia Stock Exchange period 2012-2015 is still not appropriate, given the value of determination coefficient in this study is relatively small, but there are many other variables that can be used to predict variable tax avoidence.

Simultaneous Significance Test (Test -T)Table 4.2

Test Result F

Model Sum of Squares Df Mean Square F Sig.Regression 26,306 4 6.577 3,765 0,008

Source: Secondary data processed, 2017

Based on the result of simultaneous significance test in table 4.2 above, it is known that the value of F-count is 3,765 with probability 0,008. The probability is less than 0.05 or 5%, so it can be concluded that the model has been fit or in other words that the Institutional Ownership, Independent Board of Commissioners, Audit Quality, and Audit Committee together have a significant effect on environmental disclosure.

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Partial Significance Test (Test -T)

Here is the output of regression analysis processed with SPSS 20:

Tabel 4.3Output Regression Analysis Results

VariableUnstandardized Coefficients

T Sig.B

Institutional ownership -0,833 -2.068 0.043Commissioner Indepeden 1,659 1.164 0.249Quality AuditAudit Committee 1.012

-0.5472.691-2.372

0.0090.021

Source: Secondary data processed, 2017

The average of shares owned by the institution is 49.02% of the number of shares outstanding or issued where the ownership of the shares of the institution is at a minimum of 5% and maximum of 93%. Based on the result of partial hypothesis test with t-test of Institutional Ownership (INST) influence on the dependent variable ie tax avoidance known that the significance value of 0.043 is smaller than 0.05 which means institutional ownership (INST) has a significant negative effect on tax avoidance. Thus hypothesis 1 in this study states that: "Institutional ownership positively affects tax avoidance" is not proven. The results of this study denied the results of research conducted by Shafer and Simmons (2006) determined that institutional ownership plays an important role in monitoring, disciplining and influencing managers in tax management. Based on the results of this study, indicating that the ownership of shares by institutional companies in the period 2012-2015 has the potential to practice tax avoidance but it affects the negative direction where high institutional ownership will lead to low tax avoidance and vice versa. This condition is due to institutional ownership in companies in Indonesia tends to avoid the risk of detection of tax avoidance activities and do not want to take risks that can destroy the company's reputation. Another factor that causes this hypothesis to be rejected is the institutional ownership awareness of the importance of high tax payments, and institutional share ownership also serves as a good control of corporate management actions. This result supports research by Fadhilah (2014) where the presence of institutional investors participates in the supervision and management of the company against activities that would harm the company including the aggressive taxes that the company will undertake.

Based on the result of partial hypothesis test with t-test influence of Independent Commissioner's Percentage (INDP) to dependent variable that is tax avoidance obtained by significance value equal to 0,249 bigger than 0,05 means independent ownership of board of commissioner (INDP) has no significant effect to tax avoidance. Thus it can be seen that the hypothesis 2 in this study which states that: "The percentage of Independent Board of Commissioners has a significant negative effect on tax avoidance", is not proven. The results of this study are consistent with research by Annisa and Kurniasih (2012), Fadhila (2014), Putranti and Setiawanta (2014) and Fajri et al. (2015) indicating that independent board members play a role in overseeing the running of other executive roles, if there is no oversight of independent commissioners, then it is unlikely that the other executives can manipulate their own position by gaining full control over the remuneration resulted in harming shareholders.The results of this study do not support the results of research conducted by Winata (2014) and Wibawa et al. (2016) argued that the more independent commissioners the supervision process is done more qualified because of the presence of independent parties within the company that will be more demanding transparency of corporate financial reporting. The results of this study also management is often opportunistic where they have a

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motive to maximize net profit in order to increase bonuses. Profit has been used as a major indicator of the success of managers. Based on the result of hypothesis test partially with t test of influence of Audit Quality (AUDIT) to dependent variable that is tax avoidance known that significance 0,009 less than 0,05 meaning audit quality (AUDIT) have significant effect to tax avoidance at manufacturing company listed in Stock Exchange Indonesia period 2012-2015. Thus hypothesis 3 in this study which states that: "Quality Audit positive effect on tax avoidance", proved true. The results of this study demonstrate that high quality auditors are often assumed to be able to prevent and reduce accounting practices in question and report material mistakes and irregularities rather than low quality auditors (Nastiti and Gumanti, 2011). The Big Four KAP Auditor according to some references is believed to be more qualified to display actual company value, therefore it is suspected the company audited by KAP The BigFour has a lower fraud rate compared to companies audited by KAP non The Big Four (Khoirunnisa, 2015 ). Companies with weak internal governance mechanisms tend to choose auditors of low quality. This is done so that the main owner of the company is able to maintain the benefits obtained through the weakness of corporate financial transparency because the function of auditors only to test the fairness of financial statement information of a company.

Based on hypothesis test result partially with t-test of influence of Total Audit Committee (KOMITE) to dependent variable that is tax avoidance known value of significance 0,021 smaller than 0,05, it means that audit committee amount have negative significant effect. Thus it can be seen that the hypothesis 4 in this study which states that: "Audit Committee has a significantly negative effect on tax avoidance", proved true. The results of this study contradict the results of research conducted by Fadhilah (2014) in his research found that audit committee has a positive effect on tax avoidance company.These results support the research of Maharani and Suwardana (2014), Sandi and Lukviarman (2015) and M. Fajri et.al (2015) indicating that few or no members of the audit committee do not affect tax evasion at the company. The high or low variation of tax avoidance is determined by the audit committee, the more the number of audit committee members the lower the tax avoidance. On the contrary, if the smaller the number of audit committee members, the higher tax avoidance will be.

CONCLUSION

Based on the results of research conducted to examine the influence of instirusional ownership, independent board of commissioners, audit quality, audit committee on tax avoidance at manufacturing companies listed in Indonesia Stock Exchange period 2012-2015 with total sample 108, it can be concluded that the data used in this study normal distributed, tidal there is multikolinieritas, free autocorrelation and no heteroskedastisitas so that regression equation used is good. The result of data analysis can be concluded as follows:

1. Institutional ownership (INST) has a negative effect on tax avoidance on manufacturing companies listed in Indonesia Stock Exchange period 2012-2015.

2. The percentage of ownership of independent board of commissioner (INDP) has no effect on tax avoidance at manufacturing companies listed in Indonesia Stock Exchange period 2012-2015.

3. Audit quality (AUDIT) has a positive effect on tax avoidance at manufacturing companies listed in Indonesia Stock Exchange period 2012-2015.

4. The number of Audit Committee (COMITE) has a negative effect on tax avoidance on manufacturing companies listed on the Indonesia Stock Exchange period 2012-2015

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