The effect of corporate governance mechanisms and managerial incentives on corporate tax avoidance in Indonesia

The aim of the research is to examine the link between corporate governance, managerial incentives and corporate tax avoidance. Agency problems may lead managers to make different decisions regarding tax compliance. Managers may see tax avoidance as an investment, along with other similar opportunities. To see a broadened view of the level of tax avoidance, this research uses quantile regression to exhibit the link between corporate governance and tax avoidance. This research finds a positive relationship between corporate governance mechanisms and a low level of tax avoidance, instead of a negative relationship for high levels of tax avoidance. These results indicate that the governance mechanism has a stronger relationship with more extreme levels of tax avoidance. Meanwhile, this research finds a negative influence between managerial incentives and tax avoidance. The implication of this research is that tax avoidance, at both high and low levels, can be explained by corporate governance.