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Political connection as a double-edged sword: the case of tax aggressiveness practice during the COVID-19 pandemic

Author

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  • Astrid Rudyanto
  • Julisar Julisar
  • Debora Debora

Abstract

Purpose - This research aims to examine the association between political connection and tax aggressiveness during the COVID-19 pandemic and the role of business ethics in the association between political connection and tax aggressiveness. Design/methodology/approach - This study employs a multiple regression method for 147 manufacturing firms listed on the Indonesia Stock Exchange during the pandemic era. Findings - Political connection has no association with tax aggressiveness. However, political connection has a negative (positive) association with tax aggressiveness in more (less) ethical firms. The results are robust after controlling for year-fixed effects, endogeneity issues and other tax aggressiveness measurements. Originality/value - Political connection is often cited as the driver of unethical business, including tax aggressiveness. However, this paper claims and finds that political connection is a double-edged sword. Ethical firms use political connection to reduce their tax aggressiveness, and vice versa. Previous research has paid little attention to this topic. This paper also uses COVID-19 as a natural experiment to highlight the importance of corporate social responsibility activities as business ethics.

Suggested Citation

  • Astrid Rudyanto & Julisar Julisar & Debora Debora, 2023. "Political connection as a double-edged sword: the case of tax aggressiveness practice during the COVID-19 pandemic," Asian Journal of Accounting Research, Emerald Group Publishing Limited, vol. 8(4), pages 400-410, June.
    • Handle: RePEc:eme:ajarpp:ajar-04-2023-0113
    DOI: 10.1108/AJAR-04-2023-0113
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