Tax Disclosure in Financial Statements: The Case of Indonesia

Abstract

Tax disclosure has long been of concern to the public. Corporations provide tax disclosure as part of their financial reporting, whether on a voluntary or mandatory basis. However, the level of tax disclosure is still problematic due to the secrecy aspect of taxation. This research was undertaken to better understand the effects of tax avoidance, good corporate governance, industry regulation, and participation in tax amnesty on corporate tax disclosure. This research used data from 422 public Indonesian companies that had published financial statements in the year 2019. The data were analysed using multiple linear regression. The results reveal a negative relationship between tax avoidance and tax disclosure, with lower tax avoidance leading to higher tax disclosure; a positive relationship between both good corporate governance and tax amnesty and tax disclosure, with better corporate governance and tax amnesty leading to higher tax disclosure; and a negative relationship between industrial regulations and tax disclosure, with increased industrial regulations leading to lower corporate tax disclosure. Overall, this research shows that tax disclosure not only reveals tax activities but also reflects the company’s views on tax compliance.